08 07 14 -SARW – How the mining companies and audit firms collude to evade tax in DRC

SARW and Congolese civil society investigation has confirmed BDO-ECA findings
that KCC and TFM do not keep accounting documents at their Lubumbashi head
office in the DRC, making it impossible for anybody to carry out a
reconciliation of figures indicated in their fixed asset statements. Contrary to
the laws and regulations in force in the DRC which require that financial
statements and accounts be kept at the registered office for at least ten years,
these companies keep their registry of assets outside the country – in Phoenix
(Arizona) in the USA for TFM, and in Switzerland, in the case of KCC. It is
therefore not possible to confirm the claimed $2.7 billion and $3.1 billion
investment declared by KCC and TFM respectively to date


the absence of audited statements, SARW and its partner Congolese civil society
organisations are of the view that KCC and TFM have over-valued their
investments to avoid paying tax. Further, there is no doubt that the
depreciation of these investments is only known by the investors themselves. The
Congolese Government, as well as the tax and revenue services are not able to
counter-check the tangible and intangible assets declared by the two mining
companies.  In the DRC, several companies do not have fixed asset registers,
making it impossible to prove the existence and value of equipment and other
mining infrastructure which should form the basis of any audit.


initial feasibility study in 2008 valued TFM’s investment at $2.5 billion for
three phases. By 2014, that figure has shot up to $3,1 billion for two phases
only. How much would the project cost at completion? The KCC investment has also
reached $2.7 billion without taking into account the value of the infrastructure
inherited from Gécamines and the DRC Copper and Cobalt Project (DCP SARL)
investments prior to the merger which stand at 1.3 billion which increases KCC
investment to $4 billion.  “It is clear that the Congolese State and its company
Gecamine which is in Joint venture with TFM and KCC do not know how to check the
veracity of these investments declared by mining companies, nor do they have the
capacity to do so,” says Georges Bokundu, SARW

in the DRC, adding, “The Congolese Public Treasury and the nation suffer heavy
losses by the over-valuation of investment by mining companies. Most of these
investments are not constituted by these companies’ capital investment but loans
that need to be repaid.”  


extension, this problem exposes the unethical behaviour of audit firms Ernst
& Young, Deloitte and PricewaterhouseCoppers who audit TFM and KCC
respectively. The audit reports of these three firms cannot be trusted, and are
definitely helping mining companies to evade paying tax. Given the absence of
accounting documents and fixed assets registers at the two companies’ head
offices as per DRC legal requirements, SARW and Congolese CSOs query the
reliability of the audit reports by these audit firms. Based on these
observations, they have urged the DRC Government to reject these


that TFM and KCC have not made capital contributions, and are not transparent in
the management of the investments, SARW and Congolese CSOs have asked the
Government to audit, in particular, the current levels of repayment or
depreciation of investments made in the TFM and KCC projects and ask for an
equitable sharing (equal portions) – that is 50% for Gécamines and 50% for the
partners if these investments have already been repaid or have


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