By Ignatius Mvula, Assistant Director – Mining Audit Unit, Zambia Revenue Authority, Mary Baine, Director – Tax Programmes, African Tax Administration Forum, and Ben Dickinson, Head of the Global Relations and Development Division, Centre for Tax Policy and Administration, OECD
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In May 2020, the Zambian Revenue Authority (ZRA) won a landmark tax case against Mopani Copper Mining plc in the Supreme Court. The Court ordered the company to pay additional tax of 240 million Kwacha (USD 13 million). The judgement hinged on Zambia making a technical case showing evidence of tax avoidance through base erosion and profit shifting or BEPS strategies. In countries around the world multinational enterprises (MNEs) exploit gaps and mismatches between different countries’ tax systems, costing countries up to 100-240 billion USD in lost revenue annually, the equivalent to 4-10% of the global corporate income tax revenue. Moreover, developing countries’ higher reliance on corporate income tax means they suffer from tax base erosion and profit shifting disproportionately. Zambia and many African tax administrations report that the abuse of transfer pricing rules – the pricing of goods and services between related parties of a multinational enterprise – represents one of the highest BEPS risks to their tax bases.