Sampa gives hints on what new law on investors will be, Bantubonse worried

Sampa gives hints on what new law on investors will be, Bantubonse worried

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.

International companies with operations in Zambia include Glencore and Vedanta, both listed in London, First Quantum, listed in Toronto, and Vale of Brazil.

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.

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