Following a controversial discovery about a prominent mining company, Zambia is doing tax audits on other miners dating back six years.
Zambia, Africa’s second-biggest copper producer, will be laying down the law for mining companies with upcoming tax audits going back six years.
The Zambia Revenue Authority made the decision to begin audits after discovering that a “prominent” mining company had underpaid by 76.5 billion kwacha — the equivalent of US$8.02 billion.
The tax agency said it may extend the audit period beyond the initial six years planned if it uncovers a pattern of “consistent, systematic, premeditated” tax evasion, according to a statement quoted by Bloomberg on Tuesday (March 20).
“We are announcing the preliminary assessment of 76.5 billion kwacha issued to a prominent mining company for misclassifying consumables and spare parts at importation for the last five years,” the statement continues.
“The said items were declared as mining machinery, which attract customs duty at zero percent, when in fact not,” it also states.
Some of the most notable companies with operations in Zambia include Barrick Gold (TSX:ABX,NYSE:ABX), First Quantum Minerals (TSX:FM), Mopani Copper Mines, a joint venture with majority ownership belonging to Glencore (LSE:GLEN), and Konkola Copper Mines, a subsidiary of Vedanta Resources (LSE:VED).
Zambia was the world’s seventh-largest copper-producing country in 2017 with output of 800,000 tonnes. Ministry of Mines Permanent Secretary Paul Chanda said Tuesday that the African nation hopes to put out 1 million tonnes of the metal in 2018.
“We actually hit 800,000 tonnes last year and we anticipate with certainty that we are going to reach a million tonnes or more this year,” Chanda told Reuters. Chanda cited increasing electric car demand as a factor that should increase demand for the base metal.
Update: The mining company at the center of the tax agency’s audits has since been identified as First Quantum Minerals following this article’s original publication.
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Securities Disclosure: I, Olivia Da Silva, hold no direct investment interest in any company mentioned in this article.