Gold miners appeal for prudent taxation

Tanzania should avoid to tax mining firms heavily otherwise the investors will lose confidence, a director with one of the major mining company said in Dar es Salaam on Tuesday.

"Mining companies contribute a lot to the country in terms of taxes, employment and support to communities, but their role is not widely appreciated," a director with African Barrick Gold (ABG), Ambassador Juma Mwapachu, said.

He said the government earns a lot in payroll tax from 4,569 directly employed staff of ABG and there are also many others who are indirectly employed as contractors, suppliers and those hired by suppliers.

"There is substantial multiplier effect at mining firms," Ambassador Mwapachu said at the stakeholders' dialogue on "ABG's Economic and Fiscal Contribution to Tanzania Report 2013."

The report was independently compiled by Ernst & Young. The report noted that for every direct job at ABG in Tanzania there were other 11 indirect jobs offered by the firm, which is among the biggest employers in the country.

A senior ABG official, Mr Deo Mwanyika, expressed concern over delays or failure by the government to refund value added tax (VAT). "This frustrates export oriented firms like miners," he said.

He also expressed concern over the future of the mining industry in the country, saying at present no new mines were coming up and the existing ones are being shut down. Recently, Tanzania adopted mining legislation that included a rise in royalties on gold exports to 4 per cent of gross value from 3 per cent of netback value.

The law also required mining companies to pay the government 0.3 per cent of their annual turnover, up from the previous requirement of a maximum $200,000 a year. 

Miners argue that hiking taxes and increasing royalties is the wrong approach. They say Tanzania should focus on attracting more investors and issuing additional mining licences.

"Agreements should remain stable instead of shifting goal posts," one speaker said at the forum. Tanzania is Africa's fourth biggest gold producer after South Africa, Ghana and Mali.

Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.

Tanzania's energy and minerals ministry declared in July 2012, that all mining companies had agreed to pay the new royalty rate from May and said the government would keep mining contracts under review in a bid to deepen their economic contributions.

African Barrick Gold, which has four gold mines in Tanzania, is, however, the only company that has so far publicly announced it will pay the new 4 per cent royalty rate.

African Barrick Gold's Tulawaka gold mine and Resolute Mine's Golden Pride mine are both expected to close down in mid-2013 after depleting their reserves, although work is underway to explore possibilities of mine-life extension.
Source: Daily News, reported from Dar es Salaam, Tanzania
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