A wave of African tax increases is engulfing some of Canada’s biggest mining companies, leaving them scrambling to negotiate with newly assertive governments that have lost patience with traditional tax deals.
First Quantum Minerals Ltd. is the latest Canadian company to be hit with a massive tax bill. Zambian authorities have told the company to pay an additional US$8-billion in taxes and penalties for failing to pay proper duties on imported supplies over the past five years.
First Quantum’s chief executive, Philip Pascall, admitted on Wednesday that he had been completely blindsided by the shock announcement. “I literally heard about this the day before yesterday,” he told investors in a conference call as he tried to mollify their concerns.
The amount of First Quantum’s tax bill is huge – larger than Zambia’s entire annual government budget. But it is just the latest in a series of tax manoeuvres that have hit Canadian companies hard in the past year in Africa.
Barrick Gold Corp.’s subsidiary, Acacia Mining, was handed an astonishing tax bill of US$190-billion in Tanzania last year. That amount is four times greater than Tanzania’s entire annual GDP.