DAR ES SALAAM – Tanzanian President John Magufuli on Wednesday appointed a chairperson and commissioners for the country's new miningcommission, paving the way for the issuance of new mining licences.
Africa's fourth-largest gold producer is seeking a bigger slice of the pie from its vast mineral resources by overhauling the fiscal and regulatory regime of its mining sector. Magufuli sent shock-waves through the mining community with a series of actions since his election in late 2015, which he says are aimed at distributing revenue to the Tanzanian people. In July last year, he suspended the issuance of all new mining licences until the new mining commission was in place.
Following the extensive amendments to the Mining Act, Cap.123 of the Laws of Tanzania (Act No. 14 of 2010) (the Mining Act) by the Tanzania Extractive Industries (Transparency and Accountability) Act, 2015 (TEIA) whereby a number of changes affected mineral rights holders, the Mining Act had two further amendments in 2017 as a result of a change in the Tanzanian government’s (Government) approach on the mining sector, amongst others.
The first round of amendments in 2017 were brought in terms of the Finance Act, 2017. These amendments increased the royalty rate from 4 to 6 per cent with respect to minerals exports such as gold, copper, silver and platinum. This increase has attracted some debate on how the change would affect the mining sector. In addition, the amendments introduced a clearing fee of 1 per cent (as a new requirement) on the value of all minerals exported outside Tanzania from 1 July 2017. Some stakeholders have argued that the increase in the royalty rate will have a negative impact on foreign investment in the sector.
The Mining Act (CAP. 123)
THE MINING (LOCAL CONTENT) REGULATIONS,2Ol8
The formulation of the Mineral Policy of Tanzania in 1997 and the Mining Act of 1998 boosted investment in the mining sector, which resulted into the opening of the following seven major gold mines: Golden Pride Mine in 1998; Geita Gold Mine in 2000; Bulyanhulu Gold Mine in 2001; North Mara Gold Mine in 2002; Buhemba Gold Mine in 2002; Tulawaka Gold Mine in 2005; and Buzwagi Gold Mine in 2009. These seven major gold mines boosted gold production from 1 ton of gold achieved in the 1990’s to over 50 tons in 2009.
Despite the above achievements, the public has been complaining that the mineral sector is not contributing enough to the national economy. Generally, the Government is expected to benefit from the operations of the major gold mines through payment of corporate tax, mineral royalty, local levies and other direct and indirect benefits. However, most of the major gold miners have not started paying corporate tax; instead they only pay royalties, local levies and other taxes. The public has therefore been suggesting that the Government should consider increasing royalty rates on minerals produced so as to boost Government revenue. This suggestion has also been shared by different committees formed by the Government to review the performance of the mineral sector (Kipokola’s Committee - 2004, Masha’s Committee - 2006, and Bomani’s Committee - 2008).
TMAA thought it necessary to study royalty forms and rates applicable in different countries so as to establish the best form and rate to be adopted in Tanzania for the ultimate goal of attaining a win-win situation.
On 8 June 2017, Tanzania’s Minister for Finance and Planning presented the 2017/18 budget. The related Finance Bill, 2017 was made publicly available on 13 June 2017. Following parliamentary approval, the Act received Presidential assent on 30 June 2017 and became effective on 1 July 2017.
This Alert is based on the Finance Act, 2017 which includes numerous amendments of tax and other laws not mentioned in the budget speech.
The key tax amendments under the Finance Act, 2017 include but not limited to:
• Zero-rating of Value-Added Tax (VAT) on the supply of ancillary transport services of goods in transit; and exemption from VAT of importation of an ambulance by a registered health facility other than a pharmacy, health laboratory or diagnostic center
• Exemption for registered education institutions from the Skills Development Levy (SDL)
• Changes affecting mining sector as a 1% inspection fee on export of minerals will come into effect on the date to be specified by the Minister
• Imposition of a 5% withholding tax (WHT) on payments relating to specified minerals supplied by a resident person
The full Tanzania Income Tax Act - Revised version, 2006.
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