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So. Africa: Lonmin accused of moving millions in platinum revenue to fiscal haven; company denies claims of tax avoidance

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Article
4 June 2015

So. Africa: NGOs make written submission to presidency requesting release of Farlam report into Marikana mine massacre

Author: Right2Know

'R2K welcomes the release of the AIDC Lonmin Report: exposing Lonmin's profit shifting', 4 Jun 2015:…[In] May 2015, the Alternative Information Development Centre (AIDC) launched a report…expos[ing]…Lonmin’s attempts to hide profits of at least R400 million [USD 36 million] per year between 1999 and 2012 in the tax haven of Bermuda…The fact that this information…remained secret for so long points towards the collusion between [the] corporate sector and government...In order for the public to have easy access to the financial statements of any company, all external companies of multi-national enterprises should be registered with the Companies and Intellectual Property Commission, to keep companies like Lonmin from shifting profits and avoiding local responsibilities…The Marikana Support Committee…Right2Know Campaign and the South African History Archive have made a PAIA [Promotion of Access to Information] request to the presidency to release the full Farlam Commission Report…to ensure that…victims of the [Marikana] massacre…get justice...

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Article
19 April 2015

So. Africa: NGO submission to tax commission calls for tougher stance on tax avoidance

Author: Anne Crotty, Times Live (So. Africa)

'The cost of companies' efforts to avoid paying tax', 19 Apr 2015: Shifting profits to low-tax jurisdictions not only erodes South Africa's tax base, it erodes the base for paying living wages to employees…This is the thrust of the argument by…Alternative Information & Development Centre (AIDC) in its submission to the Davis tax committee. The committee, headed by Judge Dennis Davis, is examining factors that may be eroding the South African tax base…Last [year]…AIDC…released a report detailing how mining companies use "transfer pricing" to minimise their tax liabilities…The AIDC said Lonmin - as with many mining companies - has used sales commissions, legal services and management fees to erode its South African profits. These fees and commissions are paid to entities outside South Africa…The AIDC…called on the Davis committee to enforce tougher reporting standards on companies operating in South Africa…[as] low levels of disclosure enabled companies to shift their profits and evade tax without being detected…

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Item
23 October 2014

So. Africa: Lonmin reacts to 'Cyril Ramaphosa Lonmin tax-dodge' story

Author: Lonmin Media Release

'Lonmin letter to the editor - Mail & Guardian', 23 Sept, 2014: The M&G’s story on Lonmin’s historical tax affairs published on...19 september 2014 contained significant inaccuracies and material omissions...Any suggestions of potential illegality...is seriously damaging to the Company’s reputation not least because such allegations are wholly and absolutely false...The Western Metal Sales...structure referred to was a structure not uncommon to old world conglomerates. The structure was in no way illegal and did not benefit Lonmin from a tax perspective. Lonmin remained liable for the payment of taxes in the UK...A reference in the Farlam Commisison to the 2012 financial statements of Western Platinum Limited...was a clear error in the Notes to the Financial Statements...and was explained as such...The Western Metal Sales structure...ha[s]...been discussed regularly...with the South African Revenue Services (SARS) regarding transfer pricing...These facts clearly demonstrate that Lonmin’s tax affairs during the period in questions were entirely legal.. The Company pays tax fully and properly in all jurisdictions in which it operates as a matter of policy...

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Item
16 October 2014

So. Africa: Lonmin dismisses allegations in NGO report

Author: Lonmin

'Lonmin dismisses AIDC allegations', 16 Oct 2014: The Alternative Information Development Centre (AIDC)...released their report entitled “The Bermuda connection: profit shifting and unaffordability at Lonmin 1999-2012”. AIDC admits it is not expert in tax... Nevertheless it continues to produce documents and press statements containing false accusations, misleading generalisations, ignorant conjecture and destructive innuendo. Lonmin pays tax fully and properly in all jurisdictions in which it operates. Our financial statements and structures are audited by KPMG and South African Revenue Services...Lonmin’s financial statements are prepared in accordance with the International Financial Reporting Standards...If the AIDC believes there is any impropriety it should report this to the relevant authorities...Regarding the payment of wages: Lonmin’s wage settlements since 2007 have consistently outstripped inflation and profit growth...[Furthermore] Lonmin has provided the Farlam Commission (and more recently the media) with detailed explanations of its published financial statements and...structures...Lonmin reserves all its rights with regard to legal recourse...

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Article
16 October 2014

So. Africa: Questions Lonmin must answer

Author: Craig McKune, Mail & Guardian (So. Africa)

'Questions Lonmin must answer', 16 Oct 2014: Could Lonmin have afforded to pay the wages the Marikana mineworkers demanded...before 34 of them were gunned down by police?...]A]t the Farlam commission...the company’s former operations chief Mahomed Seedat...disclose[d] how Lonmin... channeled hundreds of millions of rands to a subsidiary in tax-free Bermuda, and more millions...to the British parent company...Lonmin did not respond to this allegation...but it issued a statement...the latest in a series...[by means of] which the company has tried to contain the fallout, but [it] has left key questions unanswered. Part of its problem is that the conversation takes place in the midst of a global pushback against aggressive (though not always unlawful) corporate tax avoidance and transfer pricing...Judge Dennis Davis, who... chair[s] a tax review committee to study tax avoidance and other issues...[said]... “Significant billions” were flowing from South Africa in this way...[Also refers to Shanduka]

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Item
10 October 2014

So. Africa: Lonmin provides 'question and answer' sheet addressing tax evasion allegations

Author: Lonmin

'Questions and answers', 10 Oct 2014: The Alternative Information & Development Centre (AIDC) recently published data to support its allegation that Lonmin was “systematically” under-pricing the metal it sells...The essence of...these assertions by AIDC is that money was diverted...which should have gone to meet employee salary demands...[The] companies...alleged to have benefitted are part of the Lonmin group, so the ultimate beneficiaries of such “alleged diversions” were the shareholders of Lonmin...The facts are very different...Each year Lonmin details in its sustainability reports the value created by the group and how it was distributed...Th[ese] illustrate that the biggest share of value is directed towards employees...[Also refers to AfriOre, Akanani, Platinum, Incwala, LMS, Shanduka, Western Metal Sales, Western Platinum]

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Report
7 October 2014

So. Africa: NGO report alleges profit shifting by Lonmin - attributes failure to meet Marikana wage increase demands to this practice; Lonmin denies allegations

Author: Dick Forslund, Alternative Information and Development Centre

‘So. Africa: The Bermuda connection: Profit shifting and unaffordability at Lonmin 1999-2012’, 7 Oct 2014: This paper draws on materials...[from] the proceedings of the Marikana Commission of Inquiry...Implicitly, it takes Lonmin as an example to ask if a new commodity boom really is needed for South African mining corporations to pay decent wages, comply with environmental regulations or to implement Social Labour Plan (“SPL”) obligations...From such studies we can infer that the implementation of the existing tax regime...could go a long way to finding sufficient financing for social infrastructure and housing, as well as land and water rehabilitation...in mining communities...Transfer pricing schemes are often formally legal...[However] discussion on mining taxation techniques, resource tax or tax on profits shouldn’t be separated from discussions on tax avoidance and tax evasion...[W]e are of the view that Lonmin has been engaged in two transfer pricing arrangements....[Also refers to AfriOre, Akanani, Anglo American, Eastern Platinum, Glencore Xstrata, Impala, Incwala, JP Morgan, KPMG, LMS, Messina, PGM, Shanduka, Southern Platinum, Western Metal Sales, Western Platinum]

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Article
23 September 2014

Lonmin denies tax avoidance claims

Author: Reuters

… Lonmin, the world's third-largest platinum producer, on Tuesday denied reports that it has avoided taxes by shifting funds from its South African operations abroad. Lonmin dismissed as “false and mischievous” allegations that it has transferred funds out of the country so that they would not be used to meet miners' wage demands, social labour commitments, or be included in taxable income. “Lonmin pays tax fully and properly in all jurisdictions in which it operates,” the South African mining company said. Tuesday's statement follows an article published last week by the Mail and Guardian newspaper, and public comments by South Africa's Alternative Information and Development Centre (AIDC), which has called on South Africa's Revenue Service to investigate Lonmin's financial operations…

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Article
19 September 2014

Cyril Ramaphosa's Lonmin tax-dodge headache

Author: Craig Mckune & Andisiwe Makinana, Mail & Guardian (So. Africa)

Evidence before the Marikana commission that Lonmin moved millions in platinum revenue from South Africa to tax-free Bermuda is likely to prove embarrassing for…Cyril Ramaphosa…[He]…was a Lonmin director…[and] came out swinging last month against corporate tax evaders, which he said have committed a crime against “ordinary” South Africans.…This week the Farlam commission of inquiry…heard that, for many years, Lonmin’s South African mines have paid “sales commissions”, recently averaging more than R200-million a year, to a company it owned in Bermuda. Lonmin…[said] it only put a stop to this practice in 2012, with a decision it says it backdated to 2008…Companies can legally avoid taxes by using aggressive tax planning and offshore structures, but this has become a nightmare for tax collectors…[ Dick Forslund from the Alternative Information and Development Centre] said “A large part of this money should have been used for wages, and social and labour [spending]…”…[Also refers to Appleby Services, Incwala Resources, Shanduka Group, Western Metal Sales]

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