This week in tax: FQM in Panama tax stand-off
This week First Quantum Minerals is in a stand-off over royalties and corporate tax with the Panamanian government, while Samsung India faces a show cause notice in the country over customs duty.
Canadian mining company First Quantum Minerals threatened to close its vast copper mine in Panama over the government’s corporate tax demands on Tuesday, January 10.
FQM is disputing Panama’s demand that the company pay a minimum of B/374.7 million ($375 million) a year in taxes on profits from the Cobre Panama mine. The Canadian company made a profit of $1.4 billion in 2021 and paid $61 million in corporate tax.
FQM CEO Tristan Pascall has said that the company will put its mine into “care and maintenance” if the Panamanian government does not offer legal guarantees, particularly about the future of the tax regime.
Panama secured an agreement with FQM in January 2022 whereby the company would pay royalties of between 12% and 16% to the government. This replaced a 2% revenue royalty that was part of a deal going back to 1997.
President Laurentino Cortizo has been playing hardball with the Canadian mining company. He even ordered the mining operation halt until a final contract is signed. This has resulted in a stand-off over the tax demands.
Samsung India faces show cause notice over alleged customs evasion
The Indian subsidiary of Samsung Electronics said on Thursday, January 12 that it is reviewing a show cause notice issued to it over claims it evaded INR17.2 billion ($212 million) in customs duties.
Electronics subsidiary Samsung India is exploring legal advice after the Directorate of Revenue Intelligence (DRI) issued a notice over the classification of network devices, reported Reuters.
“This is a tax dispute involving interpretation of law. We are reviewing the notice and are exploring legal opinion,” said a Samsung India spokesperson.
Samsung India allegedly misclassified network devices, specifically remote radio heads, to gain an undue customs exemption. These allegations were reported in the Indian press and the DRI decided to launch an investigation.
The DRI has also issued a show cause notice to ‘big four’ firm PwC. The firm was hired by Samsung India to classify the network equipment. An associate director at PwC has reportedly been questioned as part of the investigation, but the firm has not commented on the claims publicly.
HMRC faces ‘black hole’ of £42bn in unpaid taxes
UK tax authority HM Revenue and Customs (HMRC) has failed to collect £42 billion ($51 billion) in taxes, claimed the House of Commons Public Accounts Committee on Wednesday, January 11.
The UK government has failed to do more to ensure HMRC can improve tax collection, resulting in billions being lost, according to the committee.
“The eye-watering £42bn now owed to HMRC in unpaid taxes would have filled a lot of this year's infamous public spending black hole,” said Meg Hillier, chair of the Public Accounts Committee.
HMRC has reportedly failed to collect about 5% of taxes owed each year. The committee report claimed this is down to insufficient resources for tax compliance. This resourcing problem also hinders the response to fraud on COVID-19 support schemes.
An estimated £4.5 billion was lost to fraud in such schemes. HMRC expects to recover just a quarter of the funds lost. This is on top of the £42 billion figure highlighted by the Public Accounts Committee.
Former Trump Organization CFO gets five-month jail term
Allen Weisselberg, former CFO at the Trump Organization, was sentenced to five months in prison and five years of probation on Tuesday, January 10.
The Trump Organization was convicted of 17 counts of tax fraud in December after Weisselberg reached a plea deal with New York prosecutors, in which he admitted his own guilt and testified against the company.
He might have faced a jail term of up to 15 years had he not accepted the agreement. As part of the sentence, Weisselberg has to pay back almost $2 million in taxes, penalties and interest on undeclared assets.
The Trump Organization is set to face a fine at Friday’s sentencing hearing, but it could also face penalties to restrict it from securing loans or obtaining government contracts. This could hold back the company in future deals.
China extends VAT incentives as part of growth strategy
The Chinese Ministry of Finance and the State Taxation Administration issued a joint announcement on Monday, January 9 to extend VAT incentives for production and lifestyle services.
Taxpayers face an extension of the measures until December 31, 2023. However, the VAT deduction for production services has been reduced from 10% to 5%, while the VAT deduction on lifestyle services is still set at 10%.
Most of the VAT relief is targeted at small businesses with monthly sales of less than 100,000 yuan ($14,700). But the Ministry of Finance may be planning more tax relief to promote growth throughout this year.
China saw GDP growth slow in 2022 as a result of its ‘zero COVID-19’ policy, but it may see the rate rise from 4.7% to 5.3% in 2023, according to analysts. The Chinese economy may be set to regain growth as the country relaxes many of its restrictions.
Next week in ITR
ITR will be revisiting corporate tax reform in the UAE and what it means for multinational companies operating in the Gulf state. It looks at whether the UAE has set an example for the wider Arab Gulf region.
ITR will also be presenting its projections for international tax in 2023. The future of the arm’s-length principle, pillar one, crypto taxes, carbon borders and much more.
Readers can expect these stories and plenty more next week. Don’t miss out on the key developments. Sign up for a free trial to ITR.