Reforming Zambia’s legal and institutional framework to curb illicit financial flows through transfer pricing in its mining sector: a case study of Mopani Copper Mines Plc v The Zambia Revenue Authority (2020) ZMSC 29

Abstract

This research explores how Zambia’s legal and institutional framework can be reformed to curb IFFs through transfer pricing using the case of Mopani Copper Mines v The Zambia Revenue Authority as a case study. Zambia, like many other resource rich African countries remains financially constrained due to illicit financial flows. This research explores how illicit financial flows through transfer pricing abuse by multinational companies occur in Zambia’s mining sector while integrating the broader context the Sustainable Development Goal 16.4 ‘to significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organised crime’. As one of the first transfer pricing cases won by ZRA in Zambia’s highest court of law, the MCM case serves as a focal point of this study. This case is significant to this study as it highlights important factors that signify the complexity of transfer pricing audits and case determination. The study relies on primary and secondary data to draw conclusions and provide recommendations. It sheds light on the progress made by Zambia in aligning its transfer pricing regulations to international standards and recognises the negative implications of illicit financial flows on the Zambian economy. Key findings of this research include the capacity constraints faced by ZRA in carrying out transfer pricing audits despite having legislation in line with the OECD guidelines and UN practice manual on transfer pricing. In conclusion, the study examines the collaborative approaches required to ensure that transfer pricing as a tool of illicit financial flows is curbed as a way to maximise revenue generation and contribute to the realisation of SDG 16.4.