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The the latest Financial Intelligence Centre (FIC) Report has revealed that some unnamed mining company has been evading paying tax to the tune of US$700 million by understating its taxable income and tax liability.
According to the report, the mine evaded tax by using, among other tricks, entering into an off-take agreement with another company in the extractive industry for its minerals aimed at profit-shifting.
The study indicated that the Company, whose name was withheld, domiciled in a secrecy jurisdiction sold the minerals at below market price over a period of five year, thereby depriving the country tax earns of up to US$700 million in tax payments.
The FIC explained in its report that this company manipulated its financial statements to mask the aggressive profit shifting practices, adding the company also manipulated its cash flow statements to give the impression that it was investing in plant and machinery, which it used to claim capital allowance for tax purposes at 100 percent.
Read more: Policy group calls for greater transparency in Zambia’s mining industry
“In order to cap its illegal activities from detection, the company used international banks and audit firms to process its transactions and audit the financial statement,” according to FIC.
Meanwhile, a clique of Prominent Influential Persons (PIPs) working with Asian nationals operating a manufacturing companies in Zambia facilitated the illegal harvesting and export of rosewood to a country in Asia.
According to FIC findings, Asian nationals working with the clique of (PIPs) bribed government officials and traditional leaders to enable the illegal harvest of the rosewood.
The report stated that at the point of export from Zambia to the Asian country, the rosewood was misclassified as sawn wood.
“The buyers of rosewood in the Asian country would then pay a company in Country A that supplies equipment and machinery, to export the equipment and machinery to Zambia.
“The equipment and machinery would be sent to the Asian nationals’ manufacturing company in Zambia as part of the normal operational needs of the manufacturing company,” the report stated.
The report further stated that the manufacturing company in Zambia would then buy real estate and motor vehicles whose beneficial owners were the clique of prominent influence persons (PIPs) working with Foreign nationals incorporated companies in Zambia with locals used as fronts.
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