Blow for Glencore over Zambian tax avoidance
Glencore has been left with egg on its face after Zambia's finance minister blew apart a key plank of its public defence against allegations of tax avoidance.
Tax row: Mopani copper mine in Zambia
The London-listed commodities trader has strenuously denied claims, first revealed in the Mail, that Zambian subsidiary Mopani Copper Mines manipulated its accounts to avoid tax.
Its repeated rebuttals have often cited the Zambian Revenue Authority, insisting that the tax body was satisfied by Mopani's contribution.
But a top government minister poured cold water on the notion that the ZRA had received its fair share from the Glencore subsidiary.
Finance minister Situmbeko Musokotwane said: 'The Zambia Revenue Authority has asked Mopani to pay more money in underpaid taxes, but they must be given a chance to respond.'
He did not put a price tag on the ZRA's demand, but said Mopani would be slapped with an even more swingeing tax bill if it doesn't offer to pay more.
'If their answers are satisfactory we will go by what they submit, but if they are not satisfactory we will adjust their tax liability upwards to the figure that the ZRA has asked them to pay,' he said.
A spokesman for Glencore (up 5.2p to 520.20p) declined to comment.
Allegations that Mopani avoided tax first emerged in a draft audit commissioned by the ZRA and written by international accounting giant Grant Thornton.
Glencore insists that the report is not only incomplete, but flawed because it does not take into account the fact that Mopani processes minerals for other companies. Until now, it appeared that the ZRA was happy with the company's explanation.
But industry sources suggested that its appetite for tapping Glencore for more tax revenues may have been whetted by complaints raised by European politicians and campaign groups about Mopani.
The European Investment Bank subsequently froze new lending to Glencore subisidiaries, pending an investigation into the tax affairs of Mopani, which has paid £230m to the ZRA since 2000.
The row over Mopani comes amid a backdrop of international measures to force greater transparency in the mining sector. The US is implementing new legislation via the Dodd-Frank Act, while the EU is preparing similar instruments.
The drive has seen mining giants such as Anglo American, BHP Billiton and Rio Tinto pledge support for the EITI. Glencore is one of the few major minerals companies which has not.
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