LUSAKA — Zambia plans to force companies to repatriate foreign currency earned from exports back to the Southern African nation as part of an effort to crack down on tax avoidance, particularly in mining.

Miles Sampa, deputy finance minister, said he expected details of the legislation, which would apply to all exports valued at more than $10,000, to be released in the next few days.

Companies would be given 60 days to deposit the funds in a commercial bank in Zambia and would have to provide evidence to the bank, through supporting documents, of the reasons for transferring funds offshore, such as for dividend payments or for import ing equipment, he said. Anyone importing goods valued at more than $10,000 would also have to provide documentation to show the goods had arrived.

Mr Sampa said the measures would enable ministers to monitor foreign currency flows and ensure that companies pay their full taxes. The government, which was elected in 2011 on a populist manifesto, has repeatedly complained that mining houses use "transfer pricing" to avoid taxes; it is estimated that the country is missing out on up to $2bn in annual revenue.

International companies with operations in Zambia include Glencore, Vedanta, both listed in London, First Quantum, listed in Toronto and Vale, of Brazil.

Frederick Bantubonse, MD of Zambia’s Chamber of Mines, said the industry body was waiting to see details of the proposed legislation, which fell under the Bank of Zambia amendment bill, passed this year.

"In the act they are talking of taking measures to monitor the inflows and outflows of foreign exchange but that could mean anything. Our fear is if they are going to reintroduce foreign exchange control, they are going to cause a lot of harm to the economy."

Zambia produces 800,000 tons of copper annually and mines being developed could raise that figure to 1.5-million tons by 2016.

Mr Bantubonse said any measure to control foreign exchange is unlikely to cause companies to halt those projects, but added, "The operations could be scaled down and definitely the future investment will be affected."

Mr Sampa said the measures did not amount to foreign currency controls and dismissed suggestions that they risked warding off foreign investors. "Scare them how? All investors that are doing everything above board, that are not doing anything illegal have nothing to be scared of — only the bogus investors. The bad ones who have been doing bad things, getting Zambia’s copper and not paying tax deliberately due to transfer pricing, those we are not worried if they leave."

The government, led by President Michael Sata, has raised royalties on mining, arguing that the country does not benefit sufficiently from its mineral wealth.

Mr Sampa said the mining sector contributed 5% to government revenue, a figure he hoped would rise to 20% as a result of the planned legislation.

Action Aid, a pressure group, alleged in a report in February that the London-listed Associated British Foods had avoided paying millions of dollars in taxes to Zambia on its sugar operations by exploiting loopholes in the tax regime.

The report estimated that Zambia had lost tax revenues of $17.7m since Associated British Foods took a majority stake in Illovo Sugar, which owns Zambia Sugar. Associated British Foods said: "Illovo denies that it is engaged in anything illegal, immoral or in any way designed to reduce the tax rightly payable to the Zambian government."

Mr Sampa said the government was still looking into Action Aid's allegations.

Financial Times