Diamond miners accused of tax evasion

via Diamond miners accused of tax evasion 11 December 2014

Struggling diamond mining companies in the Marange fields are using unconventional channels to sell gems as a way of evading the taxman.

Insiders and government sources named Mbada Diamonds and Anjin Investments as among the Marange-based companies selling diamonds unofficially to avoid paying tax.

“The Mbada coffersare now always empty yet there is production, even though it has now been drastically reduced. We are aware that the diamonds are being taken outside the country for sale on what you can call a black market. ZMDC (Zimbabwe Mining Development Corporation) and government officials know about this, but they are turning a blind eye,” said a source at Mbada.

Recently, the Zimbabwe Revenue Authority (Zimra) imposed garnishee orders on several diamond miners, which have never honoured their legal obligation to pay various forms of tax. The Zimra raids forced the companies to find other means of survival and, according to a government source in the mines ministry, the most effective way to do that was to produce and sell diamonds away from the glare of government and the Kimberly Process, which had directed that the gems be mined and auctioned in a transparent manner.

“There is a new ZMDC board and it is still trying to find its feet. It is finding it difficult to stamp its authority on the mines because of interference from government departments. To make matters worse, the Minister of Mines seems to have developed cold feet in bringing sanity to the diamond fields,” said a ministry official.

The minister, Walter Chidhakwa, spoke loudly about poor governance in Marange when he was given the ministry last year. He said the mines should merge to a share 50% stake with government, which already owns half the shares in all the companies except Marange Resources – wholly owned by ZMDC.

This was after Global Witness, an international watchdog, indicated that Zimbabwe could have lost around $2 billion in taxes to illegal smuggling of the gems. However, in recent months, Chidhakwa has been quiet.

Some of our sources say he could be overwhelmed by pressure from politicians and the military who are reported to be benefiting from the opaque extraction of the gems.

It could not be established how much government might have lost in revenue this year due but it is evident that the diamond companies are struggling to break even as the surface gems are drying up. Both Mbada and Anjin have recently seen industrial action as they fail to pay salaries. A source said Mbada was in the process of acquiring new equipment that would be used to extract conglomerates from below the surface.

However, company management was clandestinely disposing of some of the surface mining equipment in a racket that could be benefiting certain individuals. He said some of the equipment was being transferred to Mozambique.

“The companies could be taking advantage of the confusion during this period when government has indicated that it is going to force them to merge. It seems not many people, the international community included, are paying much attention,” said another source.

Martha Chikata, the Anjin public relations officer, said her company was mining conglomerate diamonds. “Unfortunately, the rate has decreased as we are getting low output after going as deep as 35 to 45 metres. This is becoming very expensive and not viable,” Chikata told The Zimbabwean.

She described Anjin’s relationship with Zimra as “splendid” saying if they encountered problems in paying tax, “we engage them and in most cases a positive agreement has been attained”.

Chikata insisted that her company was up-to-date with its remittances to government as deductions were made from their bank, before they had access to the money.

But one insider said the companies were under-declaring their diamonds, with the majority being sold through the black market.