June 6, 2011 – By Chris Mfula
LUSAKA (Reuters) - Zambia has asked commodity trader Glencore's <GLEN.L> Mopani Copper Mines for unpaid taxes after an audit of the subsidiary, leaked earlier this year, said it had underpaid mining dues, the country's finance minister said.
But Zambia is leaving the door open for a deal with Glencore. Finance Minister Situmbeko Musokotwane told Reuters on Monday that the government hoped to resolve the long-standing issue and was giving Mopani a chance to respond.
Mopani has been accused by some non-governmental organizations -- most recently by campaign groups in an open letter signed by a group of European parliamentarians -- of tax evasion and of causing widespread pollution.
Last week the European Investment Bank, the European Union's lending institution, said it had frozen all new loans to Glencore and its subsidiaries, citing "serious concerns" over the commodity trader's governance.
Most of the claims stem from a pilot audit commissioned by Zambian tax authorities, which leaked earlier this year.
Glencore has repeatedly denied the allegations in the audit report and says they are based on an incomplete study. The commodities giant, which has said it believes it will be completely exonerated, had no further comment on Monday.
"The Zambia Revenue Authority has asked Mopani to pay more money in underpaid taxes, but they must be given a chance to respond," Zambia's Musokotwane said in an interview.
Musokotwane did not detail how much was owed, but he said Mopani had been asked to pay more. He said if the company's response did not hold up to scrutiny, it would be hit with a bigger tax bill.
"If their answers are satisfactory we will go by what they submit, but if they are not satisfactory we will adjust their tax liability upwards to the figure that the Zambia Revenue Authority has asked them to pay," he said.
"We are very confident that this matter will be resolved amicably and are just waiting to hear from Mopani," Musokotwane added.
Glencore is the world's largest diversified commodities trader and listed on the London Stock Exchange in May.
Mopani, in which Canada's First Quantum <FM.TO> and the Zambian state own minority stakes, has generated more than $380 million in tax payments to the Zambian government since its privatization in 2000, through royalties, import and customs duties and income taxes.
Transparency in Africa's resources sector is a huge issue, and corruption and underdevelopment linked to it are behind a U.S. drive to force companies to come clean on their payments to foreign governments.
(Additional reporting Clara Ferreira Marques; Editing by Ed Stoddard, Alexander Smith and Steve Orlofsky)