14 June 2024 | 01:19 AM

Questions and contradictions over Lonmin’s Bermuda transfers

Key Takeaways

Lonmin insisted this week thatit did not move millions in platinum revenues to tax-free Bermuda in the leadup to the Marikana massacre – directly contradicting four years of auditedfinancial reports, three of which were specifically compiled for the SouthAfrican Revenue Service.

Lonmin’s latest explanation onlyadds to a muddle of conflicting versions that it has offered to the Marikanacommission and in response to amaBhungane questions.

Among the contradictions,Lonmin’s empowerment partner Shanduka has told amaBhungane it “stronglydisagrees” with the former’s claim that empowerment vehicle Incwala Resources (Shanduka-controlledsince 2010) blocked a decision to stop the Bermuda payments until 2012.

Last month amaBhungane reportedhow, for many years, Lonmin’s South African mining subsidiary has paid a 2%“sales commission” to another Lonmin-owned company registered in Bermuda, wherethere is no corporate tax.

If the audited accounts are tobe believed – and Lonmin said this week that they are not because of a “clearerror” – about R1.2-billion was moved to Bermuda between 2008 and 2012.

Lonmin says the payment washalved in 2008 and stopped thereafter.

The financial statements for Lonmin’sSouth African subsidiary Western Platinum, seen by amaBhungane, directlycontradict this version for 2008, 2009, 2010 and 2012.

How multinationals try avoid paying taxes

Only the 2011 report fitsLonmin’s version, but there is no note in this statement to explain the earlier“error”, which is oddly repeated in the 2012 accounts.

This is known as transferpricing: the price charged by companies for selling goods or services to othersin the same corporate group.

It is legitimate and normal, but it is a tactic thatcan be misused by multinationals seeking to avoid taxes.

For example, a company in a taxhaven might overcharge for a service from a related mining company in Africa, thusshifting group profits out from under the noses of tax collectors andconcentrating them in a tax-free jurisdiction.

There is no proof that Lonmin engaged in this practice, but confusionsurrounds its Bermuda operations.

Lonmin: “Pays tax fully and properly”

Lonmin said in a letter the Mail& Guardian last week that its “marketing” subsidiary was “registered inBermuda and operating out of London” before 2007. There seem to be no employeesthere.

But Lonmin is adamant that it “paystax fully and properly in all jurisdictions”.

It said the Bermuda subsidiarypaid tax in the UK until 2008. However Lonmin’s group annual reports show thatevery single year from 2000 to 2008 it recorded a UK tax charge, which was thencancelled completely because of “double tax relief available”.

It has paid zeroUK tax over this period. The company said this wasbecause: “Lonmin plc had accumulated losses brought forward from previous years.”

A continuous confusion of contradictions

Contradicting the rationale fora separate marketing company, Lonmin told amaBhungane in August that the SA minesdo their own marketing.

It then told the commission the opposite, saying theBermuda subsidiary and later the SA branch of its UK company marketed itsplatinum. The company attributed thecontradiction to possible “confusion”.

When evidence leaders at thecommission last month challenged former chief of operations Mahomed Seedat overcontradictions between his explanations and audited financials, Lonmin’s lawyerSchalk Burger interjected and said the financials were correct, but that,because the company had “retroactively” stopped the Bermuda payments in 2012with effect from 2008, the accounts needed restating.

But Lonmin told amaBhungane thisweek there was no such “retroactive” restructuring and that no money flowed toBermuda after 2008.

Last month Lonmin told evidenceleaders that it only signed an agreement to stop the Bermuda transfers in 2012,not in 2007, because Incwala had “vetoed” this.

Shanduka denied the explanationthis week, saying that the first it heard of the matter was in May 2012, twomonths before the agreement was “deemed” signed by Lonmin.

But Lonmin told amaBhungane thisweek that the decision had been blocked before 2010, before Shanduka tookcontrol of Incwala.

It did not explain the two year wait before Shanduka wasinformed of the matter.

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.

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Before joining the amaBhungane team in 2017, Micah was the national coordinator for media freedom and diversity at the Right2Know Campaign. He holds a Masters in African Studies from Oxford University and a BA Honours in History from Wits University.

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