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THE mining sector taxation system has loopholes that could result in mining companies operating in the country committing tax fraud, a new study has shown.

According to “The Extractive Industry in Zimbabwe: An Evaluation of Trends in Corporate Social Investments, Taxes Paid, Stakeholder Participation and Linkages to Service Delivery of Local Authorities (2009-2014)” report, regulatory authorities themselves feel that the taxing system for the mining sector could be tighter.

The report was carried out by the Institute for Sustainability Africa in conjunction with Oxfam.

Reads part of the report: “Interviews with the regulatory authorities indicated major concern on transfer pricing, trade mis-pricing, over invoicing of imports and under invoicing of exports by extractive companies as major issues contributing to tax avoidance.

“The regulatory authority felt that the collection systems had loopholes and the law itself was lenient to tax fraud. The practice impacts on natural resource capital tax bracket. There was a call for effective and efficient revenue collection system to insulate the hard impact of illicit financial flows particularly by multinational extractive companies.

“While the regular noted challenges in collecting taxes from companies, there was need for capacity development and collaboration with other agencies/actors in extractive sector.”

The research also explored establishing trends of taxes paid by mining companies to the Zimbabwe Revenue Authority (Zimra) and local authorities.

It showed that there has been decline since 2010 on taxes being paid by mining firms.

The study reported a 138 percent drop in the mining sector tax index from 2010 to 2014.

Tax figures in this analysis were based on actual taxes paid as reflected in the cash flow statement not accrual tax figure disclosed in the income statement or balance sheet.

The total payment disclosed show that they represent an average of 4.1 percent of total revenue of attributable mining companies participating in this research. However, there were two companies who could not publish attributable revenues and taxes to Zimbabwe specifically, said the report. — BH24