Zambia has no control over her exports once they cross the frontier because they are valued as free on board (FOB), says the Central Statistical Office (CSO).
It said in a statement that copper en route to the Asian or European markets while on high seas could be sold (re-exported) by the importer/trader to a different destination and Zambia would have no record of such transaction for as long as the initial importer does not declare it.
“It is important to note that since Zambia’s exports are valued as free on board (FOB), the country has no further control on the copper beyond its economic barriers,” the CSO said. In a press statement to try and clear the controversy over the exports, especially of copper in which the CSO is being accused of false reporting.
“In addition, middlemen based in a different country tend to report their countries of residence as the country of final destination when in actual fact they re-export the commodity directly to other markets,” the CSO said.
On valuation of exports and imports, CSO explained that exports are valued on free on board (FOB) basis, meaning the transaction value is the value at which exports are sold by the exporter, including the cost of transportation up to the border of exporting country.
On the other hand imports are valued on cost insurance freight (cif) basis, meaning the transaction value is the value at which goods were bought by the importer including transportation cost and insurance to the border of the importing country.
On the trends in exports of copper from 2010-2014, CSO reports that the top four major buyers of Zambian copper in order of ranking were Switzerland (61.1 per cent), China (25.6 per cent) , Britain (2.8 per cent) and South Africa (2.6 per cent) share of total copper earnings annually.
“The biggest question is why are mines consistently reporting that most of their copper exports are destined for Switzerland?” the CSO asked.
Recently the Supreme Court ruled in favour of Zambia Revenue Authority (ZRA) that exporters should produce signed documents by customs authorities in countries of destination of exports for Zambia exporters to claim VAT under Rule 18. But the Economic Association of Zambia (EAZ) said the requirement of proof of sale in addition to the production of proof of export by exporters as a requirement for Value Added Tax (VAT) refund to the mining companies was unreasonable and contrary to international practice.
EAZ president Isaac Ngoma said his association was concerned about the controversy that had developed over the application of section 18 (1)”Rule 18″ , which until recently prescribed the manner in which Value Added Tax (VAT) was applied on exports and on the basis of which refunds were given.
“Zambia’s mining tax regime, (i.e. the rules governing taxation and the rates of tax) may be seen to be relatively tough by international standards, but there is a general concern that some companies are not paying the tax they should be paying, as a result of weak inspection and enforcement systems, backed up by audits.
“These, we believe, should be the focus of attention.
General accusations of tax evasion and inadequate contributions by the mining industry to tax revenue only serve to divert attention from the painstaking detailed enforcement of well-crafted tax policies that should be our aspiration – and which EAZ believes is the true calling of the ZRA,” said Mr Ngoma.