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Mer 9 Fév 2011 07:50
Mopani pilot audit reveals tax payment irregularities
Depuis trois ans maintenant, nous disions, ainsi que ZCCM-IH, que Glencore était le plus mauvais partenaire...
By Chiwoyu Sinyangwe
Wed 09 Feb. 2011, 04:01 CAT [259 Reads, 0 Comment(s)]
A PILOT audit has revealed glaring irregularities and inconsistency in production and revenue figures that Mopani Copper Mines submit to ZRA for tax administration, most of which hinge on its links to Glencore AG.
And revelations of the audit sanctioned by the government with the aid of some cooperating partners have stated that Zambia lacks enough capacity to verify records submitted by mining firms to Zambia Revenue Authority (ZRA) for tax administration.
It stated that the taxes being paid by mining firms in the country were not consistent with production volumes and the revenues from copper sales.
According to an audit conducted by lead auditors - Grant Thornton Zambia - and Econ Pöyry, a Nordic based global consulting and engineering company, there was clear indications from the comparative analyses that there were major problems with both revenues and costs of Mopani Copper mines.
The focal point of the review was to audit a significant and representative part of the mining industry and to cover significant problems during initial phase of changing the Zambian fiscal system in 2008 and 2009 periods.
The audit revealed that most of irregularities were embedded in transfer pricing in revenues owing to Mopani's links with Glencore AG, which owns 73 per cent of the mining units based in Kitwe and Mufulira.
Most of the overall production is sold to Glencore based on the “Copper Marketing and Off-take Agreement” signed in the year 2000 which entitles Glencore UK a commission of two per cent calculated at the gross value FOB port landing.
“...we believe that the related party sales and pricing mechanisms are not in accordance with the agreement disclosed, or arms length principle,” the audit report stated. “This should have impact on the tax assessment for the period under review.”
The audit revealed that Glencore AG, the purchaser, determines prices and that some copper from Mopani is sold under an “old” contract with copper in one instance being sold at 25 per cent of official prices at LME.
“The agreement is entered into with Glencore UK Limited, but the actual sale transactions disclosed are, as far as we have been able to verify with Glencore International AG,” the audit revealed. “The agreement mentioned is in fact an agent agreement, stating that Glencore is to operate as sole sales and marketing agent for Mopani. The sales are to be made at official LME London Metal Exchange copper grade settlement quotation averaged over the relevant quotation period plus premium or less a discount realisation charge for freight.”
The audit revealed that despite Mopani selling copper grade +1 in consistency with LME prices, Glencore has consistently bought copper at prices below the market value.
The audit team accused Mopani of being hostile towards the audit which was postponed from initial February 2009 to October 2009 and most audit queries went unanswered despite the exercise being undertaken in accordance with the ZRA Act.
“The audit team has not enough information to dissect the full production cycle of copper from Mopani with the current data,” the audit report stated. “Mopani has used every opportunity available to hamper the progress of the audit and the audit team are at the moment not able to fully conclude whether the copper production from Mopani is trustyworthy or not.”
The audit report which doubted ZRA's capacity to verify records for taxation submitted by Mopani stated that there was general indication of inflated operations costs at the mine.
During the period of the audit, the labour cost for Mopani was estimated at US $50 million against the “unexplainable figure US $90 million".
"One explanation could be that costs that should have been capitalised have been taken as expense,” the audit stated. “Glencore is charging freight charges (realisation charges) based on fixed fees for deliveries CIF Rotherdam, even though the actual shipments were made to other ports, often closer to Copperbelt."
The scope of the audit report which was submitted to finance minister Dr Situmbeko Musokotwane about September 2010, involved taking a full review of operational costs, revenues, transfer pricing, employees' expenses and overheads on Mopani operations in Kitwe and Mufulira.
And the audit revealed that there was no collaboration between ZRA and the Ministry of Mines to monitor the production and revenue figures submitted by the mines as evidenced by the pilot audit on Mopani which revealed inconsistency in production figures submitted to government and those in the company's books of accounts.
“The pilot audit has shown that there is great need for determined effort at collecting the taxes that are assessed under the laws implemented by Zambian parliament,” stated the audit. “ZRA needs the Ministry of Mines to follow up production volumes from ore treated via produced volumes to sold metals on a more consistent and comprehensive basis in order for the calculation of the royalty to be reliable."
