Govt rejects IMF plan on minerals royalties

State House--Dar

The government has rejected a proposal by the International Monetary Fund (IMF) to introduce a new system to calculate mining royalties because doing so would adversely affect tax collections.

Had the government agreed to introduce the single royalty payment, the amount of tax the government collects from the mining firms would have dropped significantly.

The IMF wanted the government to introduce a one-off royalty payment procedure, according to documents seen by The Citizen, but the government objected on the grounds that its income would be hit hard if they were adopted.

 

The proposal by IMF was discussed late last year by a team of government officials, Tanzania Revenue Authority (TRA) experts and auditors from the Tanzania Minerals Audit Agency (TMAA).

According to minutes of the meeting, royalty collections from the mining companies would drop drastically if the government opted to the single royalty payment system.

The royalties are the only form of tax the government is assured of collecting from the mining companies. They are calculated on the basis of the mineral or gemstone in question.

The government rejected the proposals on the grounds of the fluid nature of gold prices on the international market.

TMAA analysis reveals, for instance, that it takes gold bullion 10 days on average to move from the date of export to the date of actual sale on the international market. By then, the price is different from the one used to calculate the royalty.

Since royalty is the only reliable source of revenue from the sector, the government argues, altering it would not be favourable. The government is aware that current royalties are low compared to what is paid in countries such as Botswana and Ghana, according to minutes signed by a TMAA official. Based on this, the government could consider increasing the rates and still remain competitive in the region.

But the government is ready to consider another proposal by the IMF that involves introducing a resource rent tax, as is the case in some countries. Nevertheless, that taxation could only be implemented in a few mines.

Source: The Citizen,thecitizen.co.tz, reported by Peter Nyanje

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