Tanzania Audit Capacity of Mining Operations is Adequate, Tax Study Suggest

Tax Justice Network Africa (TINA) has recently released a report on the implementation of the Africa Mining Vision in Tanzania titled “Where is the Money? Taxation and the state of Africa Mining Vision implementation: the case of Tanzania”.

This study assesses the current mining sector regime in Tanzania, and in the East African Community (EAC), focusing on the mining fiscal regime as well as revenue use and management.

The objective of the study is to assess the gaps between the situation at the national and regional levels and what the Africa Mining Vision (AMV) aspires to, so as to offer recommendations on areas that need to be addressed.

The study establishes that over the years, Tanzania has improved its national capacity to physically audit mineral production and exports by putting in place a dedicated mineral audit agency, the Tanzania Minerals Audit Agency (TMAA).

This has resulted in the identification of unpaid taxes owed, while also helping build the capacity of mining companies to calculate tax revenues payable.

Following the introduction of the Mining Policy of 2009, Tanzania has also undertaken reforms in the tax systems to increase revenue from the mining sector, which has seen the contribution of mining tax revenue to total tax revenue increasing from 2.41% in 2001 to about 4.41% in 2014.

However, the study points out that Tanzania still needs to do more with respect to reviewing the terms of double taxation agreements and bilateral investment treaties that it has signed with host countries of mining companies.

There are possibilities that the country lost some taxing rights to investors as the regime has become too protective of investors, the report suggests.

In addition, the manner in which the mining development agreements are being negotiated also appears to have outcomes that are in favor of the investor than Government, thereby reducing revenues.

Concerning mining sector revenue use and management, Tanzania is now at an advanced stage in establishing a sovereign wealth fund in the gas sector.

However, the report stresses the need for sovereign wealth funds to also be established with respect to other minerals, as these are finite resources which need to also take cognizance of the need for future generations.

TJNA is a Pan-African organization and a member of the Global Alliance for Tax Justice, which promotes socially- just, accountable and progressive taxation systems in Africa.

The Mining Act, 2010 provides the basis for the mining fiscal regime in Tanzania.

In addition to the Mining Act, 2010, legislation relevant for the mining sector includes the Income Tax Act Cap. 332 Revised Edition 2008 and the Value Added Tax Act, 2014.

Under the current administration of President Magufuli, mining companies’ operations in Tanzania are being increasingly scrutinized to identify any tax avoidance, for which two special committees have been established.

In return, the Tanzania Chamber Of Minerals And Energy (TMCE) has issued a press statement to contradict the false allegations that mining companies have not been paying taxes in Tanzania.

TMCE stresses that despite having legally binding agreements (MDA’s) with the Government of Tanzania for which the mining companies can draw various concessions in form of tax reliefs, mining companies have agreed to comply with a number of regulations imposed by the 2010 Mining Code, although most of them contravenes provisions of the MDA’s.