Prospects that some major gold mining companies in Tanzania would
follow Barrick Gold Tanzania exemplary of ``goodwill gesture`` of
paying advance corporate tax look imminently hard to pin down.
Way back in October 2006, mostly acting under government`s threats
on freezing gold miners` bank accounts unless they settled issues
related to fiscal liabilities and mining contracts, Barrick Gold
Tanzania acted quickly in response by agreeing to pay USD7 million a
year for five years as advance payment for corporate tax.
Payments were not statutory, rather voluntary because existing
legal and contractual frameworks provides for safeguards against
immediate payment of a range of taxes.
In an interview recently, Commissioner for Minerals Dr. Peter
Kafumu said that apart from Barrick, none of the other gold mining
giants have come out their corporate shell and declare similar
voluntary tax compliance intentions.
Tanzania`s Mining Act (1998) provides for 15 percent additional capital allowance on unredeemed qualifying capital expenditure.
This tax holiday had effectively delayed payment of 30 percent
corporate tax until the mining company had recouped costs of their
initial capital, mostly as alarming as gold miners are known to be
annually declaring huge losses.
The impact of the clause had been to push forward the day when companies would start paying the corporate tax.
In addition, companies are exempt from Tanzania`s 20 percent
value-added tax on goods and products used exclusively for mining and
can offset all equipment and machinery costs against their earnings.
Soon after Barrick`s commitments, AngloGold followed suit and
promised the government would start paying corporate tax in 2011, four
years earlier than initially expected.
In contrasting perspective, however, tax advances being paid to the
country`s Treasury since 2006 by Barrick Gold Tanzania was oddly peanut
compared with Barrick Gold Corp.
President and chief executive officer Greg Wilkins\' pay package of USD9.4-million, according to Toronto Globe & Mail.
When reached for comments, the Director fof Ashanti Gold Mine
Hatibu Senkoro said that his company would only volunteer to pay
corporate tax advances the moment his firm breaks even and starts
making sustainable profits.
Nevertheless, regardless of Ashanti`s corporate profitability
status, he said the company was paying withholding taxes, value added
tax (VAT) and 3 percent royalty to Tanzania Revenue Authority (TRA).
As part of government's efforts to obtain its real share of the
gold wealth, Dr Kafumu said a round the clock gold yields' inspection
at all major gold mining sites has been introduced to rein in on
possible cheat on actual harvests by miners so as to deny Treasury
taxes.
``We aim at 24/7 hours official inspection so that actual records
about minerals output are obtained instead of waiting for investors to
do the job on our behalf\" he stressed.
He said the system is already in place at all major gold mines,
adding that successful implementation of the exercise would enable the
government to properly assess mineral yields for tax purposes and curb
alleged dishonest corporate reporting through concoction of actual
output in order to delay payment of corporate taxes.
However, Dr Kafumu cautioned that investment in mining undertaking
in Tanzania was costly, mostly so because mining companies have also to
invest in basic infrastructure in and around the mining areas.
He brushed aside as untrue long held claims by mining activists
that mining companies were just paying 3 per cent in royalty, thus
ending up pocketing a whopping 97 per cent.
``This is not true because the 3 per cent royalty is deducted from
gross profit from which other taxes are also taken away, so it was
impossible for them to pay corporate taxes unless they start generating
profits``, said Kafumu.
Mining Act of 1998 which became effective August in the following
year is said to be one of the most generous pieces of mining
legislations in Africa, some of whose provisions and related
concessions had to be renegotiate by the incumbent administration in
the face of public outcry.
Two Canadian companies, Barrick Gold Corporation and Tanzania
Royalty Exploration (TRE) Corporation, control over 50 percent of
Tanzania's gold projects.
Barrick owns three of the seven major gold mining projects in
Tanzania; TRE controls over 60 percent of the mining rights in the
mineral rich area of Lake Victoria.
These and other foreign corporations have made windfall profits out
of the more than USD2 billion earned in gold exports in the past decade
when tax exemptions were de rigueur.
According to mining experts, the country has about one billion ounces of gold yet to be exploited.
At present, only four percent of Tanzania`s gold potential is being
exploited despite the country being Africa's third largest producer. |