Zambia court ruling against copper mining company is a victory against abusive tax practices
African Tax Administration Forum • June 1, 2020
26 MAY 2020, PRETORIA, SOUTH AFRICA
– The African Tax Administration Forum (ATAF) welcomes the ruling by the Supreme Court in Zambia in favour of the Zambia Revenue Authority in a long running tax dispute with mining company Mopani Copper Mines Plc (MCM).
The ruling on 20 May 2020 orders that Mopani pay a total of 240 million kwacha (13 million USD)
in taxes assessed for the 2006/07, 2007/08 and 2009/10 tax years within 30 days, bringing to an end a dispute that has been running since 2010.
Mopani had appealed to the Supreme Court after a decision was handed down by Zambia’s Tax Appeal Tribunal in December 2010 in favour of tax assessments raised by the Zambia Revenue Authority (ZRA) after audits it had conducted brought to light that Mopani had under-priced copper sold to its shareholder company Glencore International AG (GIAG), thus reducing its tax liability.
The ZRA argued that based on its audit findings it had established that the pricing of the sales to GIAG were significantly lower than pricing of sales to third parties such as Chambishi and ZAMEFA.
The ZRA concluded that in terms of Section 97A of the Zambian Income Tax Act the “actual condition” on the sales to GIAG were not in line with the expected arm’s length conditions as defined in that section. The ZRA concluded that one of the main purposes of the transactions was the reduction of tax liability.
This form of transfer pricing between multinational corporations and their African subsidiaries is typical of the tax avoidance practices employed by corporate taxpayers primarily to reduce their tax liabilities, as Zambia’s Supreme Court made clear in the opening paragraph of its judgement:
“The dispute in this appeal is archetypal of the problem posed to the fiscus of many developing economies by multinational corporations engaged in the extractive industry. It also in a way highlights the inadequacy of institutional capacity to deal effectively with such corporations; exposes yearning gaps in the much-needed expertise to gather and interpret essential technical information for enhanced tax revenue collection from multinational corporations.”
ATAF congratulates the Zambia Revenue Authority, which is a member of the African Tax Administration Forum, on winning its first transfer pricing case in the highest court of the country. ATAF’s Technical Advisor on international taxation provided advice to the Zambia Revenue Authority during the course of this case.
“This important judgment illustrates the fact that our members are determined to tackle the transfer pricing abuses that many corporations have been practicing with impunity for many years. ATAF is committed to assist its members fight for their fair share of taxes, money that should rightfully be paid to them, and has not been paid due to the undervaluation of their natural resources, ” said Mr Logan Wort, Executive Secretary of ATAF.
Media contacts:
Lee Corrick: Technical Advisor on international taxation
Email: lcorrick@ataftax.org
Telephone: +27 (0) 79 806 9567
Romeo Ella – Communications manager
Email: rnkoulouella@ataftax.org
Telephone: +27 (0) 79 790 2960
During the meeting, both organisations reflected on their long-standing partnership and noted the milestones achieved to date.
Ms. Baine succeeds Mr. Logan Wort , who has served as ATAF’s Executive Secretary since its establishment in 2009.
Les progrès du Bénin en matière d'analyse des données et de prévision ont également été stimulés par d'autres activités d'apprentissage par les pairs de l'ATAF.
At the heart of the discussions was the impact of the toolkits, suggested approaches, policy briefs, and technical notes developed by the committees.
Ms Mary Baine welcomed Minister Mthuli Ncube's pledge to champion tax advocacy on the continent and mobilise his counterparts for support to the African perspectives in the continental and global tax reforms agenda.
The training marked Phase One of ATAF’s broader research development programme, designed to cultivate a new generation of African tax researchers. It provides not just academic instruction, but practical tools for applying research to real-world tax challenges.
The session brought together tax officials from across Africa. Kenya, Nigeria, and Zambia presented their experiences, while Zimbabwe, Sierra Leone, and Burkina Faso officials participated in the peer learning discussions.
ATAF in partnership with the World Bank Group and the Zambia Revenue Authority launched its first technical workshop to jointly design and develop a regional Automatic Exchange of Information IT solution.
This initiative forms part of a broader regional study aimed at supporting African tax administrations in assessing the legal and administrative feasibility of strengthening compliance among individuals with substantial assets.
The ATAF Model Tax Agreement serves as a guiding instrument to help African nations negotiate treaties that better protect their interests, ensure fair allocation of taxing rights, and enhance domestic revenue mobilisation.