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03 Oct 2014 22:40
Bermuda was allegedly used by Lonmim for tax avoidance purposes.
Lonmin insisted this week that
it did not move millions in platinum revenues to tax-free Bermuda in the lead
up to the Marikana massacre – directly contradicting four years of audited
financial reports, three of which were specifically compiled for the South
African Revenue Service.
Lonmin’s latest explanation only
adds to a muddle of conflicting versions that it has offered to the Marikana
commission and in response to amaBhungane questions.
Among the contradictions,
Lonmin’s empowerment partner Shanduka has told amaBhungane it “strongly
disagrees” with the former’s claim that empowerment vehicle Incwala Resources (Shanduka-controlled
since 2010) blocked a decision to stop the Bermuda payments until 2012.
Last month amaBhungane reported
how, for many years, Lonmin’s South African mining subsidiary has paid a 2%
“sales commission” to another Lonmin-owned company registered in Bermuda, where
there is no corporate tax.
If the audited accounts are to
be believed – and Lonmin said this week that they are not because of a “clear
error” – about R1.2-billion was moved to Bermuda between 2008 and 2012.
Lonmin says the payment was
halved in 2008 and stopped thereafter.
The financial statements for Lonmin’s
South African subsidiary Western Platinum, seen by amaBhungane, directly
contradict this version for 2008, 2009, 2010 and 2012.
How multinationals try avoid paying taxes Only the 2011 report fits
Lonmin’s version, but there is no note in this statement to explain the earlier
“error”, which is oddly repeated in the 2012 accounts.
This is known as transfer
pricing: the price charged by companies for selling goods or services to others
in the same corporate group.
It is legitimate and normal, but it is a tactic that
can be misused by multinationals seeking to avoid taxes.
For example, a company in a tax
haven might overcharge for a service from a related mining company in Africa, thus
shifting group profits out from under the noses of tax collectors and
concentrating them in a tax-free jurisdiction.
There is no proof that Lonmin engaged in this practice, but confusion
surrounds its Bermuda operations.
Lonmin: “Pays tax fully and properly”Lonmin said in a letter the Mail
& Guardian last week that its “marketing” subsidiary was “registered in
Bermuda and operating out of London” before 2007. There seem to be no employees
But Lonmin is adamant that it “pays
tax fully and properly in all jurisdictions”.
It said the Bermuda subsidiary
paid tax in the UK until 2008.
However Lonmin’s group annual reports show that
every single year from 2000 to 2008 it recorded a UK tax charge, which was then
cancelled completely because of “double tax relief available”.
It has paid zero
UK tax over this period.
A continuous confusion of contradictions Contradicting the rationale for
a separate marketing company, Lonmin told amaBhungane in August that the SA mines
do their own marketing.
It then told the commission the opposite, saying the
Bermuda subsidiary and later the SA branch of its UK company marketed its
platinum. The company attributed the
contradiction to possible “confusion”.
When evidence leaders at the
commission last month challenged former chief of operations Mahomed Seedat over
contradictions between his explanations and audited financials, Lonmin’s lawyer
Schalk Burger interjected and said the financials were correct, but that,
because the company had “retroactively” stopped the Bermuda payments in 2012
with effect from 2008, the accounts needed restating.
But Lonmin told amaBhungane this
week there was no such “retroactive” restructuring and that no money flowed to
Bermuda after 2008.
Last month Lonmin told evidence
leaders that it only signed an agreement to stop the Bermuda transfers in 2012,
not in 2007, because Incwala had “vetoed” this.
Shanduka denied the explanation
this week, saying that the first it heard of the matter was in May 2012, two
months before the agreement was “deemed” signed by Lonmin.
But Lonmin told amaBhungane this
week that the decision had been blocked before 2010, before Shanduka took
control of Incwala.
It did not explain the two year wait before Shanduka was
informed of the matter.
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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.
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