In a case brought by the Zambia Revenue Authority (ZRA), the Supreme Court of Zambia has fined Glencore subsidiary Mopani Copper Mines US$13 million for violating the country’s Arm’s Length Standards (ALS).
After examining a ZRA audit of Mopani’s 2006-09 accounts, the court found transactions in contravention of the ALS in dealings between Mopani and Glencore.
The court ruled that any tax authority would have serious misgivings about the lack of an arm’s length approach in the transactions and found Mopani liable of abusing transfer pricing.
The court said Mopani and Glencore used transfer pricing as a mechanism to avoid paying ZRA full taxes due.
Less-developed countries are becoming increasingly aware of mechanisms used by multinationals to avoid paying tax in resource rich countries.
African governments are responding, notably in Tanzania where tough new legislation on transfer pricing was introduced in 2018.
Zambia meanwhile is trying to curb abusive transfer pricing but is struggling to find a balance that captures revenue without deterring foreign direct investment.
Categories: Trade Based Financial crimes News