International Monetary Fund (IMF)
Moreover, the expectation that mining industry would contribute significantly to
the country’s economic development has not been met.
A study by the International Monetary Fund (IMF) notes that in Tanzania gold exports have risen from around USD500m to USD1.5bn in the last five years due to rising gold prices, yet government revenues have remained low- USD100m per year.
This, according to Policy Forum’s report which was released last week, is as a result of corporate income tax holidays provided to mining companies.
In fact, “none of the existing gold projects have paid material income tax to date,” the IMF notes.
The IMF notes further that mining revenues will not grow much in the near future. “The growing mining sector has so far had little net fiscal impact and this is unlikely to change in the coming years, partly because of large embedded tax holidays.”
Although a new Mining Act was passed in 2010, existing gold mines remain governed by their respective agreements signed prior to the law currently in force.
Revenue losses from tax incentives granted to mining companies are significant, although the overall figures have never been calculated.
The Bomani Commission estimated that the government lost 39.8bn/- in 2006/7 and 59bn/- in 2007/8 simply as a result of fuel levy exemptions granted to the six large mining companies.
As of late 2011, mining companies were making claims to the government for refunds totaling USD274m related to their fuel levy exemptions for the period since 2002.
Mining companies have exclusive ownership of their operations and the minerals recovered and the power to dispose them as they wish as well as transferring the rights to other companies without incurring capital gains tax.
This means that the practice of buying and selling mining operations is legal and is very lucrative.
Mining companies’ ability to offset against their taxable income the full costs of their expenditure on items such as plant and machinery has led to perpetual declaration of tax losses, and thus nonpayment of corporate income tax.
In response to this, the government introduced an Alternative Minimum Tax of 0.3percent turnover in 2008, payable when companies declare three consecutive years of tax losses, although it is likely that revenues from this tax are far lower than the losses caused by the capital allowance.
In 2010, Tanzania Minerals Audit Agency (TMAA) audited 12 mining companies and reported audit ‘queries’ comprising over-declared capital allowances and operating expenditures of a total of USD705.8m implying a tax liability of about USD176m.
Other incentives are: Tax incentives for ‘strategic investors. In Tanzania, companies investing more than USD20m – typical of mining companies – are accorded ‘Strategic Investor Status’.
According to the Tanzania Investment Centre (TIC), ‘investors of big projects of over USD20 m offering great impact to the society or economy can apply for ‘special’ incentives from the government.
Thus, some foreign mining companies do have individual fiscal agreements with the government, some of which offer special concessions to individual companies but which have never formally been made public.
Newly-listed companies on the Dar es Salaam Stock Exchange (DSE) with at least 30 percent of their shares issued to the public pay only 25percent corporate income tax (compared to the standard 30 per cent) for the first three years.
In addition, shares of companies listed on the DSE are exempted from paying capital gains tax (whose normal rate is 30 percent).
Other VAT exempted items that are not mentioned above include insurance, education, financial services and tourist services.
According to the 2011 Controller and Auditor General (CAG) report, tax exemptions issued to the mining sector alone totaled 109.885bn/- while those granted by the TIC totaled 239.667bn/-.
SOURCE:
THE GUARDIAN
No comments :
Post a Comment