04 02 14 Guardian – DRC owed $3.7bn in tax by mining firms, disputed report claims

  

Democratic Republic of the Congo (DRC) is owed an estimated $3.7bn (£2.2bn)
in unpaid customs duties and fines by companies operating in its copper-rich
Katanga province between 2008 and 2013, according to an unpublished report
commissioned by the public prosecutor's office.

The
report, dated November 2013, is part of an ongoing government investigation into
suspected malpractice by customs agents and companies in the vast south-eastern
province. It accuses companies there of under-declaring the value of imports and
exports, and sometimes avoiding tax altogether, often with the collusion of
customs officials.

Some
firms named in the report questioned the accuracy of its findings, while the
head of the customs agency in Katanga said proper consultations had not been
held with the companies, and suggested the report's findings were
exaggerated.

The
public prosecutor, Flory Kabange Numbi, who declined to comment on the report,
said in a letter to local rights groups that it was too early to draw
conclusions about the outcome of the wider investigation.

DRC's
mining production has been limited by energy and infrastructure problems. The
government is under pressure to maximise revenues from the sector to help the
65-million strong population out of poverty.

Two
government ministers said the broader investigation must be completed, adding
that any cash owed by firms must be paid to the government.

The
report, compiled during a 10-day mission to Katanga led by Congolese attorney
general Simon Nyandu Shabandu, examined 25 cases of alleged customs infractions.
It found that 11 companies were liable for $741m in unpaid taxes and fines,
including Mutanda Mining, a copper miner 69%-owned by Glencore Xstrata
plc.

Penalties
were agreed by all parties after talks between the firms and the customs agency,
the report said, although it noted that the mission did not visit Mutanda
Mining, pending instructions from authorities.

Glencore
strongly denied any wrongdoing and said the report was inaccurate. It had not
agreed to any penalties, it added. "Contrary to what is stated in the draft
document, no contact was made by the 'mission' with Mutanda mining. Mutanda has
no outstanding taxes or fines," a Glencore spokesman said.

The
report said a further 252 alleged cases remain outstanding, worth an estimated
$3bn to the state in total.

Chemaf,
a privately owned Congolese company among the 11 identified by the report as
owing taxes, also denied the findings. "We are confirming that Chemaf does not
owe $21.4m in unpaid taxes," the Chemaf director, Sebastien Ansel,
said.

Hyper
Psaro, United Petroleum and United Oil and Soap, all of which belong to the
private Congolese fuel, commodities and transportation conglomerate Hyper Psaro
Group, and are named in the report as owing taxes, declined to
comment.

Other
companies identified as owing money – Comexas, Socimex, Sabot, Marine
International, Frontier, Congo Loyal and Trade Service – either did not respond
to requests for comment or could not immediately be traced.

International
mining firms have invested billions in Katanga in recent years, eager to tap its
vast copper and cobalt reserves. Mining made up 15.4% of DRC's gross domestic
product in 2012, according to the International Monetary Fund.

DRC
produced 600,000 tons of copper in 2012, making it the world's eighth-largest
producer.

Shabandu's
team complained in the report that it was given only 10 days to carry out its
work in Katanga, adding that firms did not co-operate fully with investigators.
Chemaf was deemed among the most unco-operative.

"It
is difficult for us to comment on specifics in the report when the report has
not been shared with us," Ansel said. "Chemaf does co-operate appropriately with
the various Congolese agencies, and we are not aware of any instances where it
has not been the case."

The
report highlighted alleged corruption among officials of DRC's customs agency
(DGDA) in the province, some of whom were accused of destroying evidence of tax
evasion. "The contempt of companies with regard to the customs administration
(refusing to answer invitations) and the nonchalance of agents of the DGDA show
an excessive degree of impunity which requires energetic action to uphold the
law," the report concluded.

The
provincial director of the customs agency in Katanga questioned the accuracy of
the report's figures, denying that some meetings with the companies had taken
place. "There is an inflation of the numbers, because discussions were not held
with the stakeholders. This inflation of numbers is dangerous," David Kalande
said.

In a
letter to ASADHO, a local human rights group formed in
response to widespread violations under the late former dictator Mobutu Sese
Seko, Numbi rejected a demand to publish the report.

"It
is understood that the judicial inquiry in the strict sense remains at an
investigative stage, with the background of the presumption of innocence," read
the public prosecutor's letter, which was copied to senior government figures.
"Judicial inquiries do not proceed following the diktat or cries of alarm of
journalists or human rights defenders."

The
investigation was launched after a letter from the communications minister,
Lambert Mende, to President Joseph Kabila – copied to Prime Minister Augustin
Matata Ponyo and Numbi – that raised fears of malpractice in
Katanga.

"Sources
close to the [Katanga customs agency] have sent me documents containing bundles
of indications of cases of corruption, misappropriation and fraud [at the
agency]," wrote Mende, who is also the government spokesman. He said the
investigation would be completed at its own speed.

The
finance minister, Patrice Kitebi, said: "I support the process carried out by
the attorney general that aims to recover the revenues not paid by these
traders."

The
total of $3.7bn in unpaid duties and fines would be equivalent to nearly half of
the annual budget in DRC, where simmering local conflicts and rampant corruption
have hobbled internationally-backed efforts to pacify and develop the
mineral-rich country. DRC's budget is expected to be $8.2bn in 2014.