Bloomberg News

Tanzania to Debate ‘Super-Profit’ Mine Tax in Discussion on Plan

June 10, 2011

June 10 (Bloomberg) -- Tanzania’s parliament will debate proposals for a so-called super-profit tax on the mining industry as part of talks on a five-year development plan.

A report by the country’s Planning Commission “will be discussed in the plenary session” on June 13, Stephen Wassira, minister of state in the president’s office, said in a phone interview today from Dodoma, the capital. He referred further questions on the proposed tax to Finance Minister Mustafa Mkulo, who said in a separate phone interview that he couldn’t comment because the suggested levy wasn’t included in his annual budget announced on June 8.

The commission this week published a document that said it may be “optimal” to introduce a super-profit tax in the mining industry as a way to fund a proposed 42.9 trillion-shilling ($27 billion) development plan. It said the levy may be appropriate “considering the increasing trend in mineral prices.”

Tanzania vies with Mali to be Africa’s third-biggest gold producer. Gold exports from Tanzania have increased to $1.5 billion, or 7 percent of gross domestic product, from $500 million over the past five years, the commission said. At the same time, annual government revenue from sales of the metal has remained at $100 million, or 0.5 percent of GDP, it said.

David Jairo, permanent secretary in Tanzania’s Energy and Minerals Ministry, said in a phone interview today that while he had seen the proposal, he was skeptical about any further taxation being introduced in the industry in addition to existing corporate taxes. There were a number of other ways in which the government might boost revenue from mining, Jairo said from Dar es Salaam.

Balance Realities

“We will aim to strike a balance between the realities of the industry and the need for the government to raise revenue,” Jairo said. “We’re not sure how feasible this proposal would be. Mining companies may have windfall revenue, but there may be periods of poor revenue, so we are cautious about any windfall tax.”

Tanzania’s government wants its investment policy in the mining industry to meet “internationally acceptable standards,” Jairo said. “We wouldn’t want to jeopardize our relationship with international investors. The government of Tanzania would like to assure the investment community that this should not be an impediment to companies coming to invest in Tanzania.”

African Barrick Gold Ltd., the biggest producer of the metal in Tanzania, operates four mines in the country that account for all of its production. The company said on June 8 its mines in Tanzania are subject to Mineral Development Agreements that guarantee tax and “fiscal stabilization” for projects. The accords can’t be amended without the company’s approval, it said in a statement.

Existing Arrangement

AngloGold Ashanti Ltd., the world’s third-biggest gold miner, said its Geita mine in Tanzania won’t be affected because an existing arrangement is valid for the life of the mine.

The planning commission’s report, entitled Tanzania Five Year Development Plan 2011/2012-2015/2016, was signed by President Jakaya Kikwete. Salva Rweyemamu, a spokesman for Kikwete, asked to be called back when reached on his mobile phone today. He didn’t answer two calls seeking comment later in the day.

Philip Mpango, executive director of the commission, said in an interview yesterday that he couldn’t immediately comment on the report because he was heading to a meeting. Calls to Mpango’s mobile phone today didn’t connect and he didn’t respond to text messages seeking comment.

The planning function was moved from Tanzania’s Finance Ministry in 2008 to form a commission chaired by Kikwete. The body, also described as a think tank on its website, is responsible for monitoring and advising on Tanzanian economic policy.

The five-year plan proposed by the commission targets an annual average economic growth rate of 8 percent from 2011-12 to 2015-16, the commission said. The expansion is expected to accelerate to 10 percent by 2025, it said.

Tanzania’s gold output ranked behind South Africa and Ghana, and alongside Mali’s 44.6 metric tons in 2010, according to London-based research company GFMS Ltd.

--With assistance from Sarah McGregor in Nairobi. Editors: Paul Richardson, Karl Maier, Amanda Jordan.

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net.

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net.


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