Mining and tax dodging: a dirty business all round
Members of Parliament’s International Development Committee are visiting the Southern African nation as part of their inspired inquiry into how poor countries can collect more tax, not least from transnational mining companies.
The MPs are interested in tax because poor countries lose some $160 billion a year to tax dodging by transnationals – much more than what they receive in aid.
One of the stops on their Zambian itinerary is the controversial Mopani copper mine in Mufulira, near Zambia’s northern border with the Democratic Republic of Congo. Mopani is owned largely by the commodity trading giant Glencore, which is based in the tax haven of Switzerland.
Just over a year ago, a leaked draft of a tax auditors’ report suggested that Mopani was dodging tax in Zambia – an allegation which Glencore denies.
More recently, Zambia acknowledged that it may have a problem with the mining industry generally, when it launched an audit of mining companies’ past tax payments, saying that it may be owed up to $1 billion.
The MPs are unlikely to discover anything new about Mopani’s tax payments – of which more below. What they will see is an industrial monstrosity which looms over the surrounding Kankoyo community, complete with a vast black slag heap.
They may also experience the stinking, choking sulphur dioxide (SO2) fumes from the Mopani smelter, although when I visited last November, local people said that the company often switches it off when it knows visitors are in town.
As well as causing breathing difficulties and eye irritation, SO2 becomes acid rain and makes it impossible to grow vegetables and flowers in Kankoyo. No doubt Mopani will tell the MPs of its plan to fit pollution control equipment which will stop most of the fumes, courtesy of a $50 million loan from the European Investment Bank.
The company also pollutes the air and water in other ways. Only last week, Zambia’s environmental regulator shut down part of the mine, saying it was emitting too much acid mist into the air.
Despite all this, people value the many jobs the mine provides, even though they are dangerous and insecure. They want it to clean up and contribute more to the community – not close down.
Mopani itself must be doing nicely. World copper prices are historically high, as the London Metal Exchange records.
So how much tax is it paying in Zambia, in return for the profitable minerals it is taking from the country? It is currently impossible to know.
Like many other transnationals, Glencore does not reveal how much tax it pays in each country where it works – although it publishes global figures. This is entirely legal – but it makes it much harder for tax authorities to tell whether companies are paying the right amount of tax.
Even in rich countries such as Britain, tax authorities struggle to get to grips with big companies’ hugely complex financial arrangements, which often involve highly secretive tax havens. For poor countries such as Zambia, keeping up with transnationals is much harder.
And this is where the MPs’ inquiry can make the biggest difference, for Zambians and people across the world. The trouble with financial secrecy is that it encourages bad behaviour such as tax dodging and corruption, because it makes it easy to hide.
If companies had to reveal details such as the profits they make and the taxes they pay in every country in which they operate, then it would be far harder for the unscrupulous to conceal wrongdoing from tax authorities and others with an interest in seeing that big companies play fair.
Details of big companies’ tax payments would also help people to hold their governments to account about how they are spending tax revenues.
And if tax haven secrecy were ended – something the world’s powerful governments have the power to do – then that would make tax dodging, corruption and other financial crimes all the harder.
In short, transparency is good for development. Let’s hope the MPs agree.
Rachel Baird works at Christian Aid. To find out more about the charity’s tax campaign, visit: http://www.christianaid.org.uk/ActNow/trace-the-tax/index.aspx