allAfrica.com: Tanzania: Mining Firms Targeted (Page 1 of 2)

The Government plans to review its taxation structure in this year's national Budget to get especially the mining companies to pay more, the Finance minister says.

Mr Mustafa Mkulo, the Minister for Finance and Economic Affairs, who is visiting neighbouring Mozambique, told The Citizen by telephone from Maputo yesterday that the review would particularly target the mining sector.

He was reacting to a story by America's Newswire Bloomberg, which reported yesterday that Tanzania was planning to increase tax in the mining industry, in a move aimed at ensuring that the country earns at least 10 per cent of the total annual mineral production.

A team appointed by President Jakaya Kikwete, last year to review royalties and taxes in the mining industry submitted its report to him last month, Mr Mkulo was reported to have told Bloomberg news wire in Maputo, where he is attending the annual meeting of the African Development Bank.

The review will most probably be made public by July, he added.

"We can increase revenue from mining companies by 10 times if they all pay taxes," Mr Mkulo had told Bloomberg on Wednesday, adding: "The companies agree that there are anomalies and they are keen on working with us. But we are not going to chase any company away."

Gold mining companies pay royalties of three per cent on profit, while a five per cent tax is levied on diamonds and other gemstones. Companies, including Barrick Gold Corporation, the world's largest producer of the precious metal, and Tanzanite One Ltd, the only miner of the rare blue gem, operate in Tanzania.

Interviewed by The Citizen yesterday, Mr Mkulo said that revenues from the mining sector would increase when the implementation of the recommendations of the mining review panel begins.

According to Mr Mkulo, the Government has not lost hope in getting tangible returns from the mining sector and that the panel's findings will provide the solution.

"There is still have a lot of potential in the sector and the presidential panel has recommended how we can get more from the companies," he told The Citizen.

Mr Mkulo could, however, not reveal the exact day when the recommendations would be made public.

Neither did he mention the specific tax reforms that were expected to enable the country to earn more from mining.

"The whole country awaits the findings with great enthusiasm. It is eagerly awaited in the National Assembly and we will hide nothing when the President makes it public," he insisted.

"If the recommendations are to be implemented within the 2008/2009 financial year, then it is crucial that the findings be known within the next two weeks," Mr Mkulo said.

"Talk to me after next week and I will be in a position to tell you what it will be like and if such taxation issues will be part of the 2008/2009 Budget," he said.

Reacting to the Government's move, the General Manager of Barrick Gold Tanzania, Mr Deo Mwanyika said: So far, we have no information about the proposed tax changes in this sector.

"You can't plan tax increments without involving or informing us and even the Chamber of Mines is not aware about the move," he told The Citizen over the phone.

"This is the problem of our government; it preaches consultative approach but acts differently."

'A senior official from Tanzania Chamber of Mines, who sought anonymity, said: "Every day, we just hear negative things about the mining sector and this paints a negative image of investors.

"Mining is an investment, whose benefits can't only be measured through taxes, but also by looking at employment, exports and multiplier effects on the economy it takes times to feel the real impacts."

Tanzania, Africa's third-biggest gold producer, wanted to benefit from record metal prices by boosting government revenue from mining to pay for schools and hospitals, Mr Mkulo said.

There was need to change the current framework, in which most mining companies operating in the country are exempt from payments, including the 30 per cent corporate tax and Customs duties, he said.

Zambia, Africa's biggest copper producer, increased the effective tax rate on miners to 47 per cent from 31 per cent this year by introducing a range of measures, including windfall and variable-profit taxes.

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