Zambia: Vedanta’s Konkola Copper Mines questions $18 million tax bill

Vedanta Resources’ Zambia unit, Konkola Copper Mines (KCM), is contending an $18 million tax bill issued by Zambia Revenue Authority (ZRA).

The revenue authority served the miner the multi-million dollar bill following an audit carried out by the tax authority, an industry source that pled anonymity told Reuters on Wednesday.

Zambian government has been on a tax reform that has met with opposition from powerful mining companies and international organizations supported by countries where the multinationals concerned are based.

Ranked as one of  the poorest countries in the world,  Zambia is haemorrhaging wealth that could support vital public services and anti-poverty programmes as a result of tax dodging by multinational mining companies.

A War On Want report revealed the southern country loses a staggering sum of about $3 billion a year to tax avoidance and tax evasion by multinationals. The revenue lost is an enormous sum in a country where 74% of the population live on less than $1.25 a day and six million people – 43% of the population – are undernourished.

For many years the largest producer of copper in Africa, and the seventh largest in the world has achieved record production (over 800,000 tonnes per year) that is spurred by growth in demand for metals in Asia.

There are many foreign copper mining companies operating in the country, with the largest including Glencore (a Swissbased company listed on the London Stock Exchange), British-Indian company Vedanta and Canadian companies First Quantum and African Barrick Gold.

ZRA has been carrying out massive tax assessment on mining companies and had just concluded audits for the miners. First Quantum Minerals is the first miner to be served with a tax bill, worth $8.04 billion, for unpaid import duties, a potentially huge blow for the Canadian miner that earns most its profit in the southern African country.

The massive tax assessment comes at a time when host governments, including Zambia, Indonesia, Tanzania and Democratic Republic of Congo, are demanding a bigger slice of revenue from miners amid rising commodity prices.

The size of the tax bill issued by ZRA to the mining companies has not been confirmed, though some mining companies are also disputing their own tax bills, the source noted. The source said some other mining companies were also disputing the tax bills but was not sure whether they would be part of a planned Wednesday meeting with the finance minister.