Malawi loses $43m to Paladin – Action Aid study

A study conducted by Action Aid Malawi has revealed that Malawi government has lost out on more than US$43 million in tax to the Australian mining multinational Paladin who started operating in the country six years ago to mine uranium for sale in North America.

Paladin's Kayelekera mine in Karonga, Malawi's northern boarder district

Paladin’s Kayelekera mine in Karonga, Malawi’s northern boarder district

In a report findings disseminated in Lilongwe this week and made available to Nyasa Times, the study reveals that through using complex corporate structures to exploit loopholes in international tax rules and through negotiating a huge tax break from the Malawi government, the company managed to cut millions off its tax contributions.

“To put that sum in context, in one year that US$43 million could have paid for 431,000 HIV/AIDS treatments; or39,000 teachers; or17,000 nurses, or 8,500 doctors. In a country where an estimated 910,000 people are living with HIV, mostly women, this lost revenue could have had a huge impact on these people’s lives,” reads the report.

The report indicates that more than half of this loss was down to the company’s use of international tax rules. And it was able to do this, in short, because the international tax system let them.

“It’s no surprise that Malawi lost out to the international tax system – our government never got a say in shaping global tax rules. Instead the system has been created by the richest and most powerful countries, and as a result it represents their interests and the interests of the multinational companies that are headquartered there,” the report further reads.

Paladin has since rejected the basis of Action Aid’s argument concerning tax loss as fundamentally unsound, as it assumes that the miner’s US$620M investment, including the initial US$300M development of the Kayelekera Project, further capital expenditure and working capital funding, would have proceeded if a 5% royalty had been in place.

In July, the world’s governments are meeting to agree on how to finance the fight against poverty and developing countries are pushing hard for them to be given a say in writing global tax rule and according to Action Aid Malawi this summit is a rare and crucial opportunity to reshape the international tax system.

“The summit is a rare and crucial opportunity to reshape the international tax system. To make this happen we need to put pressure on our governments to show that we want every country to be part of shaping the international tax system, and that we want a tax system that isn’t rigged against the poorest countries in the world.

“We’re working with campaigners around the world to push governments to act, and we need you to join us”, argued Chisomo Manthalu and Tissie Msonkho, Programmes Officers at Action Aid Malawi.

  • Join the campaign now and ask our government to support the creation of a new global body to tackle tax dodging – visit taxpower.orgJoin the campaign
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26 thoughts on “Malawi loses $43m to Paladin – Action Aid study”

  1. Winston Msowoya says:

    The only thing Mugabe can help you is to advise how to open bank accounts in foreign countries while back home millions of people face starvation,unspeakable state of unemployment,endemic shortage of food,medicines in hospitals and clinics,how to change Kwacha into Dollars for a national currency,how to remain in power indefinitely and above all ,how to corrupt and muzzle democratic norms.These are the things that Mugabe is highly qualified for.If Malawians want credible and readily advise,you can request that advice from our brothers and sisters in Botswana the most successful story in Africa.Whether economically or politically.My comments here refer to someone from box 13 billia NU.

  2. Pleease our government if u are honest ask Mugabe to help us in this matter he is the only one leader in Africa who well understands the value and the methods of handling our God given Mineral under our African land. This is a daylight robbery.

  3. Pulizi says:

    Another article wrote that these guys were given payment holiday and also the money was being deposited in a joint account in Portugal. If the Rich countries really care about Malawi, do the right thing. Investigate and and give the money back to Malawians.Swiss, Jersey, Portugal Australia etc please do something. Pole are suffering in Malawi and yet the monies are in off shore accounts. #bringbackourstolenmoney#

  4. Hitler says:

    Stupid Africans. All what you know is to complain for everything. God has given you this uranium resource but what have you been doing with it to uplift your well being? You have waters from lake Malawi, what are you doing with it? I don’t blame the entreprenuers like Paladin because they use their own resources and effort to do mining business while you sit phwii. Africans are not intelligent enough to cease opportunities at their disposal. Even God has given up on us. Think about it.

  5. mphini za mutchafu says:

    There is nothing wrong here tax holidays are normal in huge investments like paradin after all the govt and paradin anakambirana and agreed stop this careless senseless stupid and thoughtless studies simed at confusing people

  6. Xeenoph says:

    Shaa!!!!! this is no gud

  7. It is Bingu and Chimunthu who delibarately did this.These two guys got kickbacks.

  8. where were they for these sixyears? they are milking small cows and leaving the fat ones palinzeru?

  9. Mvula J. Mvula says:

    Bravo Action Aid for bringing your research findings out. Research Based findings can not be disputed. Once upon a time, there were Empires that ruled. These camouflaged themselves to Colonialists. The post-colonial era shows that neo-colonialism is a reality where some of the citizens enslave their own folks. The struggle for nationalism was an outcry of self expression and self determination which ushered and gave us the freedoms we wanted. We are now in our Independent dispensation but are we economically independent and free? The multinationals and the rich nations of the world are enslaving Africa not by taking them out of their lands because that would be immoral; but enslave us in our own lands. They milk Africa of its resources in many ways as expressed by Action Aid’s findings.

  10. Mwana Mulanje says:

    These Australian swindlers had an accomplice in the highest office. Yes, the late Daniel Phiri. That one with three different death dates. Wake up Nyasas!

  11. Xander Jimmy says:

    This is really pathetic…..Malawi being a poor country, atleast these MNE would have been handling their affairs in ethical manner whilst avoiding these aggressive Tax planning techniques…….how ever I feel the blame cannot be wholly on international taxation systems as they provide several tax avoidance concepts like “beneficial ownership”…….that concept if was inincluded in Malawi – Netherlands Tax treaty…..then Paladin Neitherlands cannot be allowed to claim treaty benefit as is just a conduit pipe/company which is passing what ever it receives from Malawi to Paladin Australia(which is Beneficial owner)…….hence the right treatment should be to tax interest/royalties being submitted through this conduit company……However ever if this concept or similar concept that aims at restricting treaty abuse wasn’t included then our treaty negotiators are at fault and not necessarily the model used( UN or OECD model, but likely to be UN)…….. Interms of other ways used like management fees, loyalties etc these expenses need to be in line with Section 28 of Taxation act as a general rule ( that’s under domestic law), this emphasis on expenditure being wholly, exclusively and necessarily for the purpose of trade……if these conditions are not met then such expenditures need to be disallowed!……as for it’s international law perspective these expenditures, since they are being paid to associated enterprises( Paladin Malawi to Paladin Neitherlands) they need to be in line with Transfer pricing laws, hence to be on armslength as being empowered by article9 of OECD(or its equivalent UN) model convention…..that means these expenditures need to be examined as in comparison to how independent operators are to be charging each other and justification of transaction it self in relation to expected economic benefits etc………All these techiniques would have helped MRA to ensure a fair tax is contributed by these foreign investors………how ever I hear that they were granted TAX HOLIDAY? That’s another grave mistake by the negotiators…as that has effectively eroded a right to benefit through tax revenue! ……..As for suggestion by action aide to establish a body to safeguard tax avoidance etc…..which will present interest of developing countries like Malawi… is really a brilliant idea…..but they need to come out clearly as to how different will it be to UN which is also stated to be pursuing same agenda? What about IMF?…..of which some of these supranational organizations tends to pursue contrary agendas to that of acting in the interest of developing countries………..Actionaid also need to give thorough information as to how this new body will be interacting with these already existing supranational organizations, because they are really many of which we are really waiting to see tangible impact on ground…….for example interms of misonkho OECD, UN, CATA,COMESA, SADC,etc and this new one? How different will it be?

  12. Manjawala says:

    Mugabe trust muzungu when he is dead. Bealive that bra.

  13. dog style ndi kawawa says:

    nkhani za kayelekela zinatikwana. mumadya nokha ndiye musatibhowe mwamva? faken

  14. Dr. Godfrey Ganizani Mvuma says:

    Get this money back. Malawi, wake up for once. Why are we really plainly exploited just like that as if we only have three senses: seeing, hearing and that of manufacturing babies.

  15. Wangandiyemweyo says:

    I am surprised. Very, very, very surprised! Am I hearing here that the so-called international taxation systems are something that we do not currently have the capacity to fully understand or follow? Or to say anything about concerning their application in our country? You mean we have to be told by some azungu overseas how much tax these parasitic species should pay us for feeding on our resources? We have many people in Malawi who have gone to azunguland to study exactly these things! Were they attending different classes from the ones that the formulators of the international systems attended? Or is it simply a matter of OSAUKA ALIBE MAU? God help Malawi!! I’ve always thought Mugabe is a savage, but now I am beginning to understand him. May God give us more Mugabes in Africa in general and Malawi in particular.

  16. tuvitwana says:

    Ask Bingu all thiz rubbing was dan by him. May he rest in hell.

  17. Thitherward Wendo says:

    It is interesting to note how differently the rich and poor countries see their relationship. The rich countries see it as the relationship between donors and recipients, whereas the poor countries see it as the relationship between thieves and victims.

    In south-eastern central Africa, The administration imposed by the British government stole the land, the freedom and the dignity of the African people. Later, when they realized that they could continue to harvest the benefits of economic control without having to pay the costs of administration and services, they granted the semblance of independence, while encouraging international conglomerates to continue raping the land and reaping the profits.

    The only reason that there are grounds for hope that something will be done to reform the international tax system is that the rich countries now realize that they are also being exploited by companies, like Amazon and Starbucks, that avoid paying their international taxes.

    The Struggle Continues

  18. Zanga Phee! says:

    Yo yo yo Manyasa sleeping in their own country, in this case government would have to suspend this Company.Make consultation with other authorities.Please Minister of mining we need action now other wise he must resign my fellow Malawians this is time for Demos.See my name.

  19. Boyd Kilembey says:

    I see nothing wrong with what Paladid have done to abide by internatiinal rules of taxation. To say that MAlawi did not participate in these formulation of international rules on taxation is cry babying.

  20. Chuka Must Go says:

    Indeed Chuka must go

  21. Green grass says:

    Investigate the source of funding for Bingu’s Portugal mansion and the Jersey account

  22. NYAKAMZAKO says:

    kaya zanu izo bola ife anatimangira Casablanca Mansion ndi Mpumulo wa bata!

  23. tchadiwiki says:

    Exploitation of African countries by the West. Tell me, sonce the mining started, has the average livelihood improved? Answer is NO.

    Then what was the benefit of mining such a n atural resource when now the miners are leaving us with a high risk to get exposed to radio active mining waste????

  24. Genuine Malawian says:

    That how things works in Malawi.Malawians are contented with titles given by the Mzungu while they are not knowledgeable about many things.Even mbutumas like Muluzi and JB can use titles like Drs while they don’t have knowledge of anything.No wonder Mugabe amakana ma useless titles.Do you we have people conversant with tax rules in Malawi.What did they learn about taxation in their professions to let these Aussies of Paladin to swindle Malawians of their taxes like this?Malawi should take action on this Paladin people otherwise this paladin is not benefitting Malawians.The Aussie Greg Walker and his compatriots should be taken to task while the real benefit for Malawians is very minimmal.Wake up Malawi.These are resources from your motherland.They should not be abused by any foreigners.

  25. D.Mk says:

    government of that time signed a deal that would see paladin depositing that $43m in president personal account in foreign country every yr to support their political party now that whole cash is hanging is some1 bank account accessed by family members only. pro politician government. only way African leaders akulemela mwachangu koposa.

  26. This is pathetic. This is another TAXGATE scandal.

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