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Sars must probe Lonmin, Ramaphosa - EFF

Sep 19 2014 20:29
tax

(Shutterstock)

Cape Town - The Economic Freedom Fighters (EFF) on Friday called on the SA Revenue Service (Sars) to probe Lonmin [JSE:LON] for tax evasion, following testimony before the Farlam Commission of Inquiry that the company paid large commissions to agents in Bermuda.

"Now that there is hard evidence, the EFF calls on Sars to investigate Lonmin and its directors with the aim of criminal prosecution in instances where deliberate tax avoidance is discovered," spokesperson Mbuyiseni Ndlozi said.

Ndlozi expressed outrage that Lonmin paid about R200m a year in sales commissions to a company it owned in tax-free Bermuda.

"What this means is that Lonmin, where mineworkers were murdered and where Cyril Ramaphosa is a director, has been claiming that they do not have money to pay workers the R12 500 minimum wage, while they are in reality shifting billions of rands to tax havens," he said.

Testimony before the Farlam commission

This follows a report in the Mail & Guardian on Friday which recalled that in testimony before the Farlam commission this week, a Lonmin official said the mining house only stopped paying sales commissions to the Bermuda-based company in 2012 because of resistance from local subsidiary Incwala.

The newspaper pointed out that in 2010 Ramaphosa's Shanduka group acquired a controlling stake in Incwala.

The Alternative Information and Development Centre (AIDC) also called on Sars and government to investigate Lonmin’s financial operations, other transnational mining corporations, transfer pricing, and illicit financial flows.

"Lonmin, just for the years 2008 to 2012 transferred in commission fees $160m (R1.2bn) to a subsidiary, Western Metals Sales Limited based in Bermuda," senior economist Dick Forslund said in a statement on Thursday.

"A further $155m (R1.2bn) was paid in management fees to Lonmin Management Services."

Forslund said the amounts were shifted from Lonmin's South African operations so as not to be used for meeting wage demands, social labour commitments, or be included in taxable income.

Lonmin must give answers

"Lonmin needs to clarify the role and relationship of several of its subsidiaries, not least Lonmin PLC (the parent company), Western Platinum Ltd, Eastern Platinum Ltd, Lonmin Management Services (PTY) Ltd and Western Metals Sales Limited," he said.

"Contradictory answers have been provided both to the Marikana commission and to journalists in relation to revelations made."

Forslund said Lonmin’s Bermuda connection was one piece in a complex inter-company labyrinth and picture of "excessive dividend payments" prior to the 2008 economic downturn, exorbitant executive salaries, and yearly management fees to head offices.

"This is an important part of the background to the August 16 Marikana massacre and shaped Lonmin’s response to the wage demands of rock drill operators and other workers at its operations."

Lonmin was not immediately available for comment.


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