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

1


Basis of the paper 1 billion question report
BASIS OF THE PAPER: 1 BILLION $ QUESTION REPORT UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE

  • 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 UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE

  • 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 UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE

  • 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 EROSION OF TAX BASE

  • 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 EROSION OF TAX BASE

  • 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?

3


Mange takk
MANGE TAKK EROSION OF TAX BASE


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