Zitto na Demokrasia

Zitto na Demokrasia

Tanzanian Mining companies migrating to the Mining Act 2010 and a Lusaka revolution

with one comment

Tanzanian Mining companies migrating to the Mining Act 2010 and a Lusaka revolution

Judge Mark Bomani (Bomani Commission)

Judge Mark Bomani (Bomani Commission)

This weekend Tanzanians were informed (viaThe East African- Tanzania seals new tax deal with mining firms) of the decision reached by ministry of energy and minerals and one of the giant mining company in the country, Geita Gold Mine, that new royalty rates will be applicable. The agreement includes scrapping of the 15% provision on the unredeemed capital expenditure allowance given to mining companies through their contracts. This provision was a fundamental reason why mining companies were not paying corporate tax since they started operation. It was as well one of the argument raised in Buzwagi motion during 9th Parliament. I welcome this move as it is the implementation of the recommendations of Bomani mining review commission.

The new royalty rates of 4% gross value from 3% net back value was supposed to be implemented since the new mining legislation was enacted in 2010. Mining companies resisted to migrate to new law although they were paying new rates in protest. Amending the mineral development agreements (MDAs) to effect the new rates including service levy to local government authorities is a positive step forward.

However, as a country we still generate peanuts from mining sector. With mineral exports valuing US$ 1.7 billions, revenues ( royalty, taxes and other levies) to government coffers averages only $150 millions. Largest source of revenues are royalty and employees taxes ( PAYE). We must think outside the box and introduce fiscal measures that maximizes government revenues without negatively impacting investments. Scrapping abuse prone corporation tax is one of the way to go. Zambia was thinking of this idea by introducing higher royalty rates.

Royalty, which is tax deductables, charged on gross production assures governments of revenues and easier to monitor any abuses. It is not subject to excessive tax planning measures done by multinationals and addresses the challenge of base erosion and profit shifting. Companies will be forced to cut down unnecessary costs and completely ends habit of inflating investments expenditures in order to declare losses.

Zambia, knowingly or unknowingly, might have started a revolution never to stop. A new model of taxing extractive sector in the offing. This is the beginning of the end of the corporate tax regime in extractive industry and it is a welcome move.

One Response

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  1. although it have been a long time to make a change and resistance to enter in the new laws ts my hope that this change in the mining sector that was once raised due to the motiobn presented in the parliament ts my hope that these changes wil lead to a wider boost to the natives economy as wel as country economical development…..wel done zitto for ur david n goliath fight that u always tend to do during parliamentary sessions n off the parliament too

    Hillary Ismail

    October 13, 2014 at 3:46 PM

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