Calls for probe into Lonmin’s alleged tax evasion

2014-09-20 09:28

The transfer of over R2.3 billion in fees from Lonmin to two of its subsidiaries, with one located in a tax haven, should be investigated, the Alternative Information and Development Centre (AIDC) has said.

“Lonmin, just for the years 2008 to 2012 transferred in commission fees $160 million [R1.2 billion] to a subsidiary, Western Metals Sales Limited based in Bermuda,” senior economist Dick Forslund said.

Bermuda is a well-known tax haven.

“A further $155million [R1.2 billion] was paid in management fees to Lonmin Management Services.”

The AIDC called on the SA Revenue Service (Sars) and government to investigate Lonmin’s financial operations, other transnational mining corporations, transfer pricing, and illicit financial flows.

The Economic Freedom Fighters yesterday echoed the AIDC’s call, calling on Sars to probe Lonmin for alleged tax evasion.

Lonmin was not immediately available for comment.

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.

Forslund was reacting to testimony at Tuesday’s hearing of the Farlam Commission of Inquiry, which is investigating the deaths of 44 people during a strike at Lonmin’s Marikana mine in August 2012.

“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.”

At the Farlam commission on Tuesday, former Lonmin chief operating officer Mahomed Ismail Seedat was questioned about the transfers and the relationship between the different companies.

Seedat could only provide general information that was contradictory, Forslund said.

“Nevertheless, he was forced to admit in reference to the Lonmin subsidiary in Bermuda, Western Metal Sales Limited, that ‘A structure like this is normally set up to be optimal from a tax perspective’.”

According to Forslund, Seedat told the commission the Bermuda operation was closed in 2008. However, financial reports audited by firm KPMG recorded flows of money to Bermuda until 2012.

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