tax incentives in tanzania s mining sector
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TAX INCENTIVES IN TANZANIA’S MINING SECTOR

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TAX INCENTIVES IN TANZANIA’S MINING SECTOR. NGOWI, HONEST PROSPER SENIOR LECTURER IN ECONOMICS MZUMBE UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE. [email protected] ; +255 754 653 740 P. O. BOX 20266 DAR ES SALAAM, TANZANIA. 1. BASIS OF THE PAPER: 1 BILLION $ QUESTION REPORT.

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ngowi honest prosper senior lecturer in economics mzumbe university dar es salaam campus college

NGOWI, HONEST PROSPER SENIOR LECTURER IN ECONOMICS MZUMBE UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE

[email protected];

+255 754 653 740

P. O. BOX 20266 DAR ES SALAAM, TANZANIA

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basis of the paper 1 billion question report
BASIS OF THE PAPER: 1 BILLION $ QUESTION REPORT
  • LEGAL FRAMEWORK FOR TAX EXEMPTION IN TANZANIA
    • SECTION 17 OF 1997 INVESTMENT ACT
    • 2010 MINING ACT: ONLY FOR NEW MINING PROJECTS
    • PRE-2010 MINING INVESTORS HAVE INDIVIDUAL (SECRET) AGREEMENTS WITH THE GOVERNMENT
incentives open to mining sector
INCENTIVES OPEN TO MINING SECTOR
  • HOLDERS OF TIC CERTIFICATE OF INCENTIVES
    • IMPORT DUTY EXEMPTION ON CAPITAL GOODS
    • 0% VAT ON IMPORTS
    • CARRY OVER LOSSES FOR 5 YEARS AGAINST FUTURE PROFIT
  • EXEMPTIONS FOR INVESTORS IN SEZs & EPZs
    • CORPORATE INCOME TAX FOR 1ST 10 YEARS
    • WHT ON RENT, DIVIDENDS & INTEREST RATE FOR 1ST 10 YRS
    • VAT ON UTILITIES ; ALL LGAs TAXES FOR 1ST 10 YEARS
    • UNLIMITED REPATRIATION OF PROFIT
    • INDIVIDUAL FISCAL AGREEMENT WITH GOVT
specific tax incentives for mining sector
SPECIFIC TAX INCENTIVES FOR MINING SECTOR
  • ZERO IMPORT DUTY ON FUEL (STD IS TSHS 2000 PER LITRE)
  • ZERO IMPORT DUTY ON EQUIPMENT UP TO END OF 1ST YEAR OF OPERATION, THEN PAY 5%
  • NO CAPITAL GAIN TAX (OTHER SECTORS PAY)
  • NO VAT ON LOCAL SUPPLIES AND THEIR SUBCONTRACTORS
  • REDUCED STAMP DUTY AT 0.3%; NORMAL RATE IS 4%
  • MAX PAY OF LGAs TAXES UP TO $200,000 P.A … LOWER THAN 0.3% OF TUROVER REQUIRED BY LAW
govt revenue lost in mining sector in selected years erosion of tax base
GOVT REVENUE LOST IN MINING SECTOR IN SELECTED YEARS: EROSION OF TAX BASE
  • INCENTIVES/EXEMPTIONS: TSHS 72.6B P.A
  • ONLY SMALLEST COY WAS AMONG 15 MAJOR TAX PAYERS IN 2011
  • TMAA AUDIT QUERIES: UP TO $176M P.A ALLEGED OVERCLAIMS
  • FUEL LEVY EXEMPTION: TSHS 39.8B (2006/7); TSHS 58B IN 2007/08; COYS CLAIMED $274M IN 2011
  • IMF: NO MATERIAL TAX PAID IN MINING SECTOR
  • GOLD XPORT: FROM $500M TO $1.5B, BUT GOVT REVENUE CONSTANT AT $ 100M P.A
breakdown of taxes paid by large scale mining coys in 2008
BREAKDOWN OF TAXES PAID BY LARGE SCALE MINING COYS IN 2008
  • 65.4% IS PAYE: PAID BY EMPLOYEES NOT COYS
  • 11.2% IS SDL
  • 8.3% IS WITHHOLDING TAX
  • 6.0% (ONLY) IS CORPORATE/INCOME TAX
  • 5.9% IS VAT
  • 3.1% IS ‘OTHER TAXES’
  • ... SEE THE PIE
  • SOURCE: TMAA, ANNUAL REPORT 2010, P.31
emerging issues
EMERGING ISSUES
  • 1997 INVESTMENT ACT TOO OLD (15 YEARS)
  • ARE ALL INCENTIVES NECESSARY?
  • TOO GENEROUS INCENTIVES IN TANZANIA
  • REASONS FOR INCENTIVES INVALID THEN AND NOW
  • CONDITIONAL INCENCTIVE: EMPLOYMENT; TECH-TRANSFER; INTERLINKAGE WITH LOCAL ECONOMY
  • LOST IN MINING, CAN TZ WIN IN GAS AND OIL?

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