adminJohannesburg. – Lonmin Plc (LMI), a South African platinum producer crippled by a five-month strike this year, could have met workers’ wage demands had it not moved revenue through a Bermudan subsidiary, a lobby group said.
The world’s third-biggest platinum miner has moved earnings from South Africa to low-tax Bermuda using a unit called Western Platinum Ltd since at least 2006, the Cape Town-based Alternative Information and Development Centre said in a 41-page report by Dick Forslund, an economist.
The practice deprived workers, communities and South Africa’s tax authorities of 400 million rand ($36 million) a year and ending the arrangement would have freed enough money to meet striking employees’ wage demands, it said.
The Association of Mineworkers and Construction Union requested a basic wage of R12 500 a month in 2012 and this year.
“Collapsing one of the transfer-price arrangements and cutting down the other to cost-price level would have allowed the company to meet the 2012 rock drill-operator demands,” the AIDC said.
The accusations are “false” and Lonmin “pays tax fully and properly in all jurisdictions in which it operates,” the company said in a statement today.
Having to raise $1,5 billion from shareholders in the five years to 2013 shows there were no hidden profits within the company, it said.
Report basis
The AIDC’s report is based on previously unpublished financial statements made available to the Marikana Commission of Inquiry, which is investigating the deaths of about 44 people in August 2012, including 34 on a single day, when police opened fire on a crowd of striking mineworkers near Lonmin’s Marikana shaft.
The company’s Western Platinum unit transferred sales commissions worth 2 percent of group revenue from South Africa to Bermuda and then paid management fees of an almost-equal amount to a South Africa-registered subsidiary in the mid-2000s, the AIDC said.
Lonmin stopped the transfers temporarily from September 2012 for economic reasons, the AID C said. “In our view, this testifies to their profit shifting character,” it said.
The company paid more than $200 million a year in taxes from 2006 to 2008, dropping to an average of about $8 million annually in 2009 to 2013, the AIDC said.
The legality of Lonmin’s revenue shifting is “irrelevant” because “the argument is about extra resources found and used alternatively,” it said.
Lonmin said the compounded growth rate of its wage bill for the bulk of its workers was about 74 percent for the five years to 2013 despite incurring $232 million of losses in the period.
“AIDC admits it is not expert in tax and that it regards South Africa’s tax laws as irrelevant for the purposes of its paper,” Lonmin said.
“Nevertheless, it continues to produce documents and press statements containing false accusations, misleading generalisations, ignorant conjecture and destructive innuendo.” – Bloomberg.
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