{"id":97721,"date":"2016-01-22T13:49:00","date_gmt":"2016-01-22T12:49:00","guid":{"rendered":"https:\/\/edu.danwatch.dk\/?post_type=undersgelse&#038;p=97721"},"modified":"2022-12-06T14:23:14","modified_gmt":"2022-12-06T13:23:14","slug":"how-copper-is-sneaking-off-the-books","status":"publish","type":"undersgelse","link":"https:\/\/edu.danwatch.dk\/en\/undersoegelse\/how-copper-is-sneaking-off-the-books\/","title":{"rendered":"How copper is sneaking off the books"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">In 2014, copper worth billions of dollars seems to have disappeared on its&nbsp;way from Zambia to Switzerland.&nbsp;A first glance at trade statistics from Trade Map shows that \u2018copper and&nbsp;articles thereof\u2019 valued at USD 4.2 billion were exported to Zambia\u2019s largest&nbsp;export market for copper, Switzerland. But the same database shows&nbsp;that Switzerland did not import any \u2018copper and articles thereof\u2019 at all from&nbsp;Zambia in 2014.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-happened-to-the-copper\">What happened to the copper?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">It never went to Switzerland, says Dr. Andreas Missbach, head of the Commodities,&nbsp;Trade and Finance Department, Berne Declaration.&nbsp;\u201cSwitzerland appears in Zambian statistics of copper exports because&nbsp;a multinational Swiss-based company exports a lot of that copper. But it&nbsp;is not going physically to Switzerland. The business model of commodity&nbsp;traders is called \u2018transit trade\u2019, since the products never reach Switzerland.&nbsp;They are going directly to end users everywhere.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is confirmed by Nkula Edward Goma, a former programme officer&nbsp;at Center for Trade Policy in Zambia and from one of the CSO\u2019s, who&nbsp;raised the case against Glencore.&nbsp;This article looks into the various trade and tax schemes that multinational&nbsp;mining companies use in order to lower their tax rates and increase&nbsp;their profits from extracting resources in Zambia; these practices have demonstrated&nbsp;long-term impacts, including illicit cash flows out of the country&nbsp;at the expense of the Zambian people and of their basic human rights.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"transfer-mispricing-is-draining-zambia\">Transfer mispricing is draining Zambia<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Discrepancies in trade data show up for many reasons \u2013 countries may use&nbsp;different valuation methods or different types of trade recording systems \u2013&nbsp;but the fact that the discrepancies are so large that Switzerland\u2019s import of&nbsp;copper from Zambia does not even appear in trade statistics is an indicator&nbsp;that transfer mispricing is going on, said two researchers, Mwanda Phiri&nbsp;and Shebo Nalishebo from the Zambia Institute for Policy Analysis and&nbsp;Research, in the Zambia Daily Mail, March 2015.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Transfer pricing happens whenever two companies from the same multinational&nbsp;group trade with each other, establishing a price for the transaction;&nbsp;this is not illegal. Transfer mis-pricing, or re-invoicing, happens when&nbsp;goods leave the exporting country under one invoice, and the invoice is&nbsp;re-directed to the purchaser\u2019s subsidiary in another country (usually a tax&nbsp;haven), where the price is altered. The revised invoice is then sent to the&nbsp;purchaser in the importing country for payment. This allows a multinational&nbsp;company to shift profits to subsidiaries located in countries with lower&nbsp;tax rates, thereby increasing the company\u2019s overall profits; this practice is&nbsp;considered abusive and illegal.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Transfer mispricing accounted for 80 percent of illicit financial flows out&nbsp;of developing countries over the last decade, which translates to an estimated&nbsp;USD 4.688 trillion of estimated USD 5.86 trillion in total illicit financial&nbsp;flows, according to IBAHRI.&nbsp;The phenomenon appears to be widespread, since the majority of global&nbsp;trade happens across borders, but within multinational companies.&nbsp;One example comes from a report leaked from auditing firm Grant&nbsp;Thornton in 2012 that found evidence that Glencore International was&nbsp;transferring profits to Switzerland, where the company would pay a lower&nbsp;tax rate, in violation of OECD guidelines.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">According to the NGO Action Aid, the company\u2019s tax practises cost the&nbsp;Zambian government as much as \u00a376 million per year in lost corporate&nbsp;taxes.&nbsp;Grant Thornton never confirmed the report, and the case against Glencore&nbsp;was settled with OECD\u2019s National Contact Point in Switzerland.&nbsp;Glencore said all transactions were conducted on an arm\u2019s-length basis&nbsp;and at internationally agreed prices. Eventually, the case was dismissed.&nbsp;Transfer pricing is among the greatest tax abuses in developing countries,<br>according to IBAHRI. Other abuses include the negotiation of tax&nbsp;holidays and incentives; the taxation of natural resources; and the use of&nbsp;offshore investment accounts.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cSecrecy jurisdictions are also a concern because of their role in facilitating&nbsp;tax abuses. International standards that promote greater transparency&nbsp;and more effective exchange of information for tax purposes need to be&nbsp;further developed,\u201d the IBAHRI report states.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"poverty-prevails\">Poverty prevails<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Zambia is the second-biggest producer of copper in Africa, and the seventh&nbsp;largest in the world, according to World Copper Factbook; it is the eighth&nbsp;largest according to the US Geological Survey 2014. This landlocked country&nbsp;in the southern part of Africa has abundant natural resources, including&nbsp;cobalt, zinc, uranium and gemstones, yet it remains one of the poorest&nbsp;countries in the world.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/old.edu.danwatch.dk\/wp-content\/uploads\/2016\/01\/kmc-assets-1024x731.jpg\" alt=\"\"\/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Copper is Zambia\u2019s leading industry. It accounts for more than 70 percent&nbsp;of Zambia\u2019s export earnings and 12 percent of government revenue.&nbsp;Zambia produced more than 700,000 metric tons of copper in 2014, and is&nbsp;on track to do so again in 2015, said the Minister of Mines, Energy and Water&nbsp;Development in Zambia, Christopher Yaluma, to Bloomberg in June.&nbsp;Despite Zambia\u2019s valuable resources, according to the World Bank, 60&nbsp;percent of Zambians live in poverty and 42 percent in extreme poverty,&nbsp;living on less than USD 1.25 per day. Transfer mispricing is the main reason&nbsp;for this.&nbsp;Between 1970 and 2010, illicit cash flows due to transfer mispricing&nbsp;amounted to an estimated a loss to the country of USD 17.3 billion (in&nbsp;2010 prices), according to a 2013 UN paper on Zambian mineral extraction,&nbsp;\u201cCapturing Mineral Revenues in Zambia.\u201d<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"tax-abuse-hinders-human-rights\">Tax abuse hinders human rights<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Tax abuse has considerable negative impacts on human rights, because&nbsp;it deprives governments of the resources required both to offer programmes&nbsp;that support economic, social and cultural rights, and to create&nbsp;and strengthen the institutions that uphold civil and political rights, suggests&nbsp;the International Bar Association\u2019s Human Rights Institute (IBAHRI).&nbsp;Simply put, tax abuse hinders development and is therefore a violation&nbsp;of several human rights.&nbsp;The UN Special Rapporteur on Extreme Poverty and Human Rights has&nbsp;illustrated how poverty is connected, whether as cause or consequence, to&nbsp;violations of fourteen different human rights, including the rights to food, to&nbsp;health, to education, to social security, and to the principle of transparency.<\/p>\n\n\n\n<div class=\"wp-block-group dw-fakta alignleft\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"copper\">COPPER<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Copper is a metal that has been used by humans for over 10,000 years.&nbsp;<\/li>\n\n\n\n<li>Today copper and its alloys are indispensable in the electronics industry&nbsp;due to their excellent conductive properties, as copper is mainly used in&nbsp;wires, cables and other electrical equipment. <\/li>\n\n\n\n<li>Zambia holds six percent&nbsp;of the world\u2019s known copper reserves, though the World Bank estimates&nbsp;that its real share could be greater.<\/li>\n<\/ul>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"source-world-bank-and-world-copper-factbook-2014\">Source: World Bank and World Copper Factbook 2014<\/h5>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">In Zambia, this is indeed the case. The country is far from reaching the&nbsp;UN\u2019s Millennium Development Goals, which include reducing poverty and&nbsp;maternal mortality, preventing new HIV infections, and ensuring that children&nbsp;complete secondary school. These are all indicators that progress&nbsp;and human development are happening way too slowly in a country with&nbsp;enormous underground resources.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"who-is-responsible\">Who is responsible?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The Zambian state has the responsibility to protect its citizens\u2019 human rights,&nbsp;and the mining companies have the responsibility to respect human rights,&nbsp;according to the UN Guiding Principles on Business and Human Rights.<\/p>\n\n\n\n<div class=\"wp-block-group dw-fakta alignleft\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"copper-mine-production-in-zambia\">COPPER MINE PRODUCTION IN ZAMBIA<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Zambia is the 13th largest producer of copper in the world<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>2013: 760 tons<\/li>\n\n\n\n<li> 2014: 730 tons<\/li>\n\n\n\n<li>reserves: 20,000<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">World total (rounded)<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>2013: 18,300 tons<\/li>\n\n\n\n<li>2014: 18,700 tons<\/li>\n\n\n\n<li>Reserves: 700,000<\/li>\n<\/ul>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"source-usgs-2015\">Source: USGS 2015<\/h5>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">To begin with the latter, companies must have appropriate policies and&nbsp;due diligence procedures in place to ensure that their activities do not have&nbsp;negative impacts on human rights. This means that multinational enterprises,&nbsp;as well as their advisers and financiers, should acknowledge and act to redress&nbsp;the ways that their tax planning strategies can negatively impact human rights.&nbsp;Since the negative impacts that tax abuse has on poverty and human rights&nbsp;are so severe, the state has a number of obligations to counter tax abuse,&nbsp;according to the IBAHRI report \u201cTax Abuses, Poverty and Human Rights\u201d&nbsp;(2013), which states:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cThese flow from the state\u2019s obligation to use the maximum available&nbsp;resources to progressively realise human rights including the obligation to&nbsp;confront tax abuses as part of an overall plan to strengthen financial and tax&nbsp;governance. Furthermore, states have the obligation to ensure coherence&nbsp;between corporate, fiscal, tax and human rights laws and policies, both at the&nbsp;domestic and international levels.<\/p>\n\n\n\n<div class=\"wp-block-group dw-fakta alignleft\"><div class=\"wp-block-group__inner-container is-layout-flow wp-block-group-is-layout-flow\">\n<h2 class=\"wp-block-heading\" id=\"market-share-of-the-five-largest-copper-producers\">MARKET SHARE OF THE FIVE LARGEST COPPER PRODUCERS<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Kansanshi mining, owned by First Quantum Minerals: 35 percent<\/li>\n\n\n\n<li>Konkola copper mines, owned by Vedanta Resources: 17 percent<\/li>\n\n\n\n<li>Lumwana mining company, owned by Barrick Gold: 15 percent<\/li>\n\n\n\n<li>Mopani Copper mines, owned by Glencore: 15 percent<\/li>\n\n\n\n<li>CNMC Luanshya Copper mines, owned by China Nonferrous Metal&nbsp;Mining: 5 percent<\/li>\n<\/ul>\n\n\n\n<h5 class=\"wp-block-heading\" id=\"source-eiti-2013\">Source: EITI, 2013<\/h5>\n<\/div><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">This includes the corollary obligations to&nbsp;avoid corporate, fiscal or tax measures that have retrogressive impacts on&nbsp;human rights.&nbsp;The obligation to do no harm with respect to economic, social and cultural&nbsp;rights should be understood to include an obligation for states to assess and&nbsp;address the domestic and international impacts of corporate, fiscal and tax&nbsp;policies on human rights.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Indeed, the UN\u2019s Guiding Principles on Business and Human Rights imply&nbsp;access to remedy provided by the state. The \u2018Access to Remedy\u2019 principles&nbsp;focus on ensuring that where people are harmed by business activities,&nbsp;there is both adequate accountability and effective redress, both judicial and&nbsp;non-judicial.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the case of the Zambian state, this translates into not only strengthening&nbsp;fiscal and tax governance and enforcement capacity, but also ensuring transparency&nbsp;and access to information.&nbsp;Danwatch has tried to contact the Zambian Revenue Authority for comment&nbsp;by email, but there has been no response.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In 2014, copper worth billions of dollars seems to have disappeared on its&nbsp;way from Zambia to Switzerland.&nbsp;A first glance at trade statistics from Trade Map shows that \u2018copper and&nbsp;articles thereof\u2019 valued at USD 4.2 billion were exported to Zambia\u2019s largest&nbsp;export market for copper, Switzerland. But the same database shows&nbsp;that Switzerland did not import any \u2018copper [&hellip;]<\/p>\n","protected":false},"author":21,"featured_media":11601,"parent":0,"template":"","meta":{"_acf_changed":false,"_gspb_post_css":"","_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","ghostkit_customizer_options":"","ghostkit_custom_css":"","ghostkit_custom_js_head":"","ghostkit_custom_js_foot":"","ghostkit_typography":"","_ppma_block_editor_authors":""},"categories":[],"tags":[],"branche":[3316],"serie":[3317],"genre":[438],"land":[504,505],"serie_fokus":[],"forside":[1717],"tema":[620,625],"virksomhed":[3315,746,3313,3314],"ppma_author":[2957,2984],"class_list":["post-97721","undersgelse","type-undersgelse","status-publish","has-post-thumbnail","hentry","branche-mining-and-extraction","serie_el_forside-broken-promises","genre-investigation","land-mozambique-en","land-zambia-en","forside-artikel-normal","tema-environment","tema-tax","virksomhed-icvl","virksomhed-rio-tinto","virksomhed-riversdale","virksomhed-tata-steel","author-louise","author-ago"],"acf":[],"taxonomy_info":{"branche":[{"value":3316,"label":"Mining and Extraction"}],"serie_el_forside":[{"value":3317,"label":"Broken Promises"}],"genre":[{"value":438,"label":"Investigation"}],"land":[{"value":504,"label":"Mozambique"},{"value":505,"label":"Zambia"}],"forside":[{"value":1717,"label":"Artikel (normal)"}],"tema":[{"value":620,"label":"Climate &amp; Environment"},{"value":625,"label":"Tax"}],"virksomhed":[{"value":3315,"label":"ICVL"},{"value":746,"label":"Rio Tinto"},{"value":3313,"label":"Riversdale"},{"value":3314,"label":"Tata Steel"}],"author":[{"value":2957,"label":"Louise Voller"},{"value":2984,"label":"Anna Glent Overgaard"}]},"featured_image_src_large":["https:\/\/edu.danwatch.dk\/dw-content\/uploads\/2016\/01\/17035684230_08618d8b75_o.jpg",1920,1280,false],"author_info":{"display_name":"Louise Voller","author_link":"https:\/\/edu.danwatch.dk\/author\/louise\/"},"comment_info":"","evt_samarbejdspartner_logo":false,"_links":{"self":[{"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/undersoegelse\/97721","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/undersoegelse"}],"about":[{"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/types\/undersgelse"}],"author":[{"embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/users\/21"}],"version-history":[{"count":0,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/undersoegelse\/97721\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/media\/11601"}],"wp:attachment":[{"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/media?parent=97721"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/categories?post=97721"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/tags?post=97721"},{"taxonomy":"branche","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/branche?post=97721"},{"taxonomy":"serie_el_forside","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/serie?post=97721"},{"taxonomy":"genre","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/genre?post=97721"},{"taxonomy":"land","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/land?post=97721"},{"taxonomy":"serie_fokus","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/serie_fokus?post=97721"},{"taxonomy":"forside","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/forside?post=97721"},{"taxonomy":"tema","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/tema?post=97721"},{"taxonomy":"virksomhed","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/virksomhed?post=97721"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/edu.danwatch.dk\/en\/wp-json\/wp\/v2\/ppma_author?post=97721"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}