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Zambia Tackles Foreign Investors To Combat Tax Evasion

by Lorys Charalambous, Tax-News.com, Cyprus

06 May 2013


The Zambian Government is planning to impose a new ruling within the next two weeks with a view to freezing foreign currency made from exports, mainly in the mining sector, in an attempt to reduce tax evasion.

The Government has estimated it is losing USD2bn annually due to tax avoidance, equivalent to 10% of the country's GDP.

The majority of foreign investment in Zambia is within mining and although it is Africa's biggest copper producer, providing around 20% of export earnings, state revenues from this are worth less than 0.5% of GDP.

The Government claims that this discrepancy is a result of tax avoidance, asserting that some foreign companies are sending profits back to their own countries by invoicing loans and consultancy from parent groups at high rates.

The ruling is expected to apply to all imports and exports worth over USD10,000. All companies would have 60 days to deposit funds into a Zambian commercial bank and would be required to provide evidence to justify the transfer of any funds offshore.

In 2011, Zambia doubled its mining taxes to 6% after claims it was not receiving reasonable benefits from the industry. It is rumored the Government is in the process of amending its mining tax code which would enable taxes to rise further.

TAGS: tax | investment | tax avoidance | mining | foreign direct investment (FDI) | offshore | Zambia

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