Zambia accuses mining firms of 'blackmail'

Some companies have threatened to halt operations and lay off workers if taxes are not refunded

Zambia accuses mining firms of 'blackmail'

World Bulletin/News Desk

The Zambian government has accused several mining companies of "blackmail" following threats by the latter to halt operations and lay off workers to protest withheld tax refunds estimated at nearly $600 million.

"This is an act of blackmail; under our laws, this is an indictable offence," Minister of Mines, Energy and Water Development Christopher Yaluma told Anadolu Agency in an exclusive interview.

"If such blackmail attempts continue, we will not hesitate to bring all those responsible to book – regardless of their social status," he warned.

Several mining companies threatened to halt operations and lay off their workers over withheld $600 million in refundable Value Added Taxes (VAT).

Yaluma said there were many avenues by which affected companies could negotiate with the government for the VAT refund.

"My ministry will not hesitate to take punitive action against companies trying to blackmail the government via workers' retrenchments," he threatened.

"My advice to mining companies is to stop using blackmailing tricks to solicit for the VAT refund," he added.

Under VAT rule number 18, companies, including those that export and import goods and services, are allowed to demand taxes refund for exported or imported goods and services.

Citing exaggerations on the part of some companies for refunds, the government, now insists that companies must produce a certificate of shipment and tax invoices from the country of origin/destination.

Companies that have proof are refunded by the Zambia Revenue Authority (ZRA) while those unable to produce the certificates, including mining companies, are not.

"Currently, the mining industry has an inordinately large amount of surplus VAT, amounting to over $600 million [which is] yet to be refunded by the ZRA," Zambia Chamber of Mines President Jackson Sikamo told AA.

"This is having adverse effects on cash flows of mining firms in the country, particularly given the recent dip in prices of the commodity," he said.

Sikamo lamented that mining companies remained burdened with huge taxes, despite the poor performance of their commodities on world markets.

"The cost of electricity is too huge as the industry shoulders some of the cost of residential power consumption, including the issue of illegal mining and the absence of railway infrastructure," he said.

"In the face of all these frustrations, mining companies have continued to honor their tax obligations and have remained the leading contributor to the Zambia revenue stock," Sikamo insisted.

He went on to warn, however, that if the ZRA failed to release the VAT refunds, mining companies would likely record further negative growth in 2014.

"When this happens, our members will have no option but to halt operations, including slashing the workforce in terms of retrenchments," said Sikamo.

He noted that one mining company, Glencore, had already suspended its operations and laid off over 800 workers after the VAT refund it is owed was withheld.

Sikamo said the company had been forced to place its operations under maintenance due to the cash flow restrictions caused by withholding the refund.

He said the Mopani Copper Mine had also threatened to lay off over 20,000 Zambian miners on the ground that the withholding of VAT funds had made its operations unsustainable.

"Although the situation is regrettable, there is nothing we can do," Sikamo asserted.

"The move is the only pragmatic solution that will ensure that the mines stay in business, because no one will continue to sit and watch the situation deteriorate without taking any action," he added.

Güncelleme Tarihi: 23 Ekim 2014, 13:11