Tanzania: McIntyre touts more taxes on mining sector

TAXES charged on mining industry should be increased to enable the country increase revenues from the rapidly depleting mineral resources whose prices in the world market are skyrocketing.

Outgoing World Bank Country Director John McIntyre said in Dar es Salaam recently that while it was necessary for the government to reduce taxes charged on imported fuel to lower local pump prices, there was need to bridge such gap with more revenue from the mining sector.

"There is need to look at tax exemptions and increase the tax base so that government revenue should increase. Mining is also one of the areas where government needs to earn more," said Mr McIntyre who leaves the country this month after ending his four years of services for Tanzania, Rwanda and Burundi.

He said some of the mining companies which are given exemptions locally actually go back home to pay same taxes. "Some of the investors have tax treaties back home so if they don't pay here, they do pay back home," McIntyre pointed out.

Mining companies are strongly opposed to the idea of the super-profits taxes and news that parliament will discuss the topic while debating Planning Commission's Five-Year Development Plan this week, sent shares of multinational corporations with projects in the country, tumbling.

Finance and Economic Affairs Minister, Mustafa Mkulo however did not include the super-profits tax proposal into his 2011/12 budget estimates speech and ruled out any possibility of introducing it although his budget targets to collect 17.2 per cent of gross domestic product from the very same sources.

The Planning Commission suggested in its Five-Year Development Plan unveiled by President Jakaya Kikwete last week that introducing the super-profit tax on the mining industry may help raise funds to finance the 42.9trn/- development blueprint.

Skyrocketing gold prices have attracted fair mining proceeds activist to push the government to introduce the super-profits taxes to increase revenue for development projects. Gold prices have more than doubled from 400 US dollars (approx. 600,000/-) a decade ago to close to 1,000 US dollars (over 1.5m/-) per ounce.

The Planning Commission report said gold exports reached over 1.5bn US dollars (approx. 2.25trn/- or 20 per cent of Mkulo's 13.5trn/-) of which the country earned less than 300m US dollars (450bn/-).

Major foreign mining corporations operating in the country doubted the possibility of government introducing such a tax without consulting them.

"Rumours of a super-tax on minerals production in Tanzania are totally without merit and based upon a recommendation by a Uganda-based non-governmental organization that is not connected to the Tanzanian government in any way," wrote Tanzanian Royalty Exploration Corporation's President and Chief Executive Officer, James Sinclair on the company's website on Tuesday.

Cooling down investors of the Canadian based mining company, Mr Sinclair said such a tax may negatively affect the country's rapidly developing sector which many locals feel is benefiting foreign corporations.