MAC: Mines and Communities

Tanzania's taxing problem

Published by MAC on 2011-05-02
Source: The Citizen

All Tanzanian companies (not just mining companies) are entitled to a refund on their input VAT. 

Thus, last week's announcement that AngloGold Ashanti and African Barrick are among those seeking a refund of more than US$270 million of this tax isn't an anomaly as such.

However, given the profits these companies make, and Tanzania's precarious financial situation, it is highly questionable whether the government should be offering any tax concessions at all.

Tanzania: Firms, Govt Discuss Sh411 Billion Tax Refund

The Citizen (Dar es Salaam)

26 April 2011

Dar es Salaam - A number of mining companies are reported to be in "advanced talks" with the government about a $273.9 million (about Sh411 billion) tax refund, the Chamber of Minerals and Energy has said. The move comes after years of government dilly-dallying to settle the refunds, according to information obtained by The Citizen.

The companies which are in the talks include AngloGold Ashanti Ltd (ANG), African Barrick Gold Ltd (ABG) and other miners of the precious metal, according to the Bloomberg website.

The companies said the taxes owed to them have accumulated since 2002. The Tanzania Revenue Authority (TRA) has also reportedly confirmed that the negotiations were continuing.

Efforts to seek comments yesterday from the Finance minister, Mr Mustafa Mkullo, and his Energy and Minerals counterpart, Mr William Ngeleja did not succeed as their phones were switched off.

The country's tax policy for the mining industry provides for a refund of duties on fuel used to generate electricity to power gold mines, as well as value added tax (VAT).

Mr Godvictor Lyimo, chairman of the finance committee at the chamber was quoted by the website as saying the miners were claiming about 60 per cent of the total amount in refundable fuel duties and 40 per cent of VAT.

"Engagement with the government to resolve the matter are at advanced stages," Mr Lyimo said in an interview conducted by Bloomberg on April 20. "Government has shown good intention to resolve the matter."

Tanzania is Africa's fourth-largest gold producer, according to data on the US Geological Survey's website. South Africa, Ghana and Mali are the leading producers on the continent. Exports of the metal from Tanzania jumped by 22 per cent to $1.6 billion in the year through February, the Bank of Tanzania said last month.

"We are in talks with the miners, but cannot give you figures of payments from taxpayers," Mr Protas Mmanda, the TRA director for taxpayer education, said in a phone interview with Bloomberg.

AngloGold, the world's third-biggest gold miner, is claiming $62 million (about Sh93 billion) in refundable fuel duties and $49 million (about Sh64.5 billion) in VAT from the government, according to its 2010 annual report. African Barrick, which operates four mines in the country, is owed $121 million (about Sh181.5 billion), its annual report shows.

"ABG has been actively involved in the discussions with the Tanzanian government and the Tanzanian Revenue Authority to resolve the status of fuel exercise levies and VAT refunds for its operations," African Barrick said.

"These issues have been outstanding for some time and were further complicated by amendments made to certain tax laws."

In 2009, the government amended its tax laws requiring miners to pay VAT on all purchases. Previously, miners were allowed VAT relief because of the volume of their orders. Government then had to refund the bills after every 30 days. The state also relieved gold miners of duties on fuel for generating electricity.

The industry consumes about 13.5 million litres of fuel per month, while gold-mining companies estimate fuel accounts for 30 per cent of their operating cost, Mr Lyimo said.

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