The PF regime plans to force companies to repatriate foreign currency earned from exports back to the country. Miles Sampa, deputy finance minister, told the Financial Times he expected details of the legislation, which will apply to all exports valued at more than $10,000, to be released in the next few days.
Companies would be given 60 days to deposit the funds in a commercial bank in Zambia and would have to provide evidence to the bank, through supporting documents, of the reasons for transferring funds offshore, such as for dividend payments or for the import of equipment, he said.
Anyone importing goods valued at more than $10,000 would also have to provide documentation to show the goods had arrived.
Mr Sampa said the measures would enable ministers to monitor foreign currency flows and ensure companies were paying their full taxes. The government, which was elected in 2011 on a populist manifesto, has repeatedly complained that mining houses use “transfer pricing” to avoid taxes; it is estimated that the country is missing out on up to $2bn in annual revenue.
Frederick Bantubonse, general manager at Zambia’s Chamber of Mines, said the industry body was waiting to see details of the proposed legislation, which falls under the Bank of Zambia amendment bill, passed this year.
“In the act they are talking of taking measures to monitor the inflows and outflows of foreign exchange but that could mean anything,” Mr Bantubonse said. “Our fear is [that] if they are going to reintroduce foreign exchange control, they are going to cause a lot of harm to the economy.”
Zambia produces 800,000 tonnes of copper annually, and mines being developed could raise that figure to 1.5m tonnes by 2016.
Mr Bantubonse said any measures to control foreign exchange were unlikely to cause companies to halt those projects, but added: “The operations could be scaled down and definitely the future investment will be affected.”
Mr Sampa said the measures did not amount to foreign currency controls and dismissed suggestions that they risked warding off foreign investors.
“Scare them how?” Mr Sampa said. “All investors that are doing everything above board . . . that are not doing anything illegal have nothing to be scared of – only the bogus investors,” he said. “The bad ones who have been doing bad things, getting Zambia’s copper and not paying tax deliberately due to transfer pricing; those we are not worried if they left.”
Mr Sampa said the mining sector contributed 5 per cent to government revenue, a figure he hopes will rise to 20 per cent as a result of the planned legislation.
“At the moment the situation is win on one side – only the shareholders are winning; the people of Zambia are still in abject poverty,” he said.
Action Aid, a pressure group, released a report in February in which it alleged that Associated British Foods, the London-listed group, had avoided paying millions of dollars in taxes to Zambia on its sugar operations in the country by exploiting loopholes in the tax regime.
The report estimated that Zambia had lost tax revenues of $17.7m since ABF took a majority stake in Illovo Sugar, which owns Zambia Sugar. ABF said: “Illovo denies emphatically that it is engaged in anything illegal, immoral or in any way designed to reduce the tax rightly payable to the Zambian government.”
Mr Sampa said the government was still looking into Action Aid’s allegations.
The legislation could come into force from mid-May, he said.