Former commissioner for minerals, who is currently an independent mining
consultant and analyst, Dr Peter Kafumu, told The Citizen: “Refunding
will be tough because the government has no money…it received billions
as VAT and excise duty, but it has failed to refund these companies for
some years now.”PHOTO|FILE
By The Citizen Team
Posted Monday, November 4 2013 at 07:43
Posted Monday, November 4 2013 at 07:43
In Summary
Another company that has also threatened to sue
is Resolute Mining Tanzania Ltd, which closed its business last year in
Nzega after its mine lifespan ended.
Dar es Salaam. Major
foreign-owned gold mining firms operating in Tanzania, including South
African-based Anglogold Ashanti, are seeking arbitration at the
International Chamber of Commerce (ICC) to recover over $410 million
(Sh676billion) tax refund, The Citizen has learnt.
Another company that has also threatened to sue is
Resolute Mining Tanzania Ltd, which closed its business last year in
Nzega after its mine lifespan ended.
An officer with Resolute who spoke to The Citizen
yesterday under conditions of anonymity because he isn’t an authorised
spokesperson said: “We’ve made it clear that we’re taking this matter to
the ICC because all other options have failed and we aren’t alone...”
The officer noted that the contract signed between
miners and the government has a clause that allows an aggrieved party
to seek redress at the ICC.
The government was a few years ago taken to the
ICC by Dowans Ltd in which the latter finally got a reward of $115
million, sparking a strong public outcry.
“The MDA signed between the firms and the
government has a provision for arbitration in case of disputes.
Negotiations seem to be stalled due to the government’s unwillingness to
accept the miner’s proposals, fearing that it could set a precedent for
other firms in other sectors... Besides, the government is in financial
difficulties, thus it’s unlikely to pay,” the government source said.
The revelation comes amid a major fall of global
gold prices, which may lead to the companies cutting down on
investments, thus impacting heavily on service providers. Investments in
mining exploration have also dropped by 20 per cent since 2012.
But African Barrik Gold (ABG) a company with over
$1bn in revenue and a market capitalisation of over $900m, said it has
opted for a direct negotiations with the government.
For instance ABG’s monthly pending tax refund is
$10million(Sh16.5billion), while it gets a refund of $2 million after
every three months from the government, which the company says isn’t
enough considering the financial crisis currently facing the industry
following the plunge in gold price at the world market.
The refund, which has been accumulated for about
five years now, is VAT and excise duty, paid by the mining firms in
their export and import transactions.
Details gathered by The Citizen show that a big
chunk of this money is VAT paid on gold exports which, according to the
Mineral Development Agreement (MDA) signed between miners and the
government, is refundable.
Tanzania tax laws state clearly that firms
producing goods for export don’t pay VAT, but according to reliable
sources within the mining sector, major gold producers have been paying
18 per cent tax in every single ounce of gold they export. Tanzanite and
diamond exporters too have been paying 18 per cent VAT.
Former commissioner for minerals, who is currently an
independent mining consultant and analyst, Dr Peter Kafumu, told The
Citizen: “Refunding will be tough because the government has no money…it
received billions as VAT and excise duty, but it has failed to refund
these companies for some years now.”
Asked whether he has been hired by these mining
firms to help them recover the billions, Dr Kafumu responded: “I am not
hired by anyone…I’m an independent consultant who helps those who seek
my expertise.”
The suspension of the tax relief has caused $410
million outstanding to the companies, with the government owing $120
million and $50 million to GGM and Resolute Mining respectively.
Tax refund to ABG may have reached $240 million for the past two years, according to details gathered by The Citizen.
According to Dr Kafumu, the country’s uncertain
tax policy, coupled with higher production costs, will make Tanzania,
which is Africa’s fourth biggest gold producer, a less attractive
destination for foreign extractive sector entrepreneurs.
In Tanzania, actual production costs are between
$1,000 and $1,103 per ounce, which is higher than the average cost in
Africa ($957 per ounce).
Insiders with knowledge on the negotiations
between the government and the firms said the gold miners have
threatened to take the matter to ICC if there is a total deadlock.
ABG Senior Vice President Deo Mwanyika told The
Citizen yesterday: “The amount might be higher than the $200 million
you’ve just mentioned though I don’t have the exact figure for the
entire sector.”
According to Mr Mwanyika, the government was
misled in 2010 when the then Finance Minister, Mustapha Mkullo,
suspended tax relief that used to be enjoyed by mining companies.
Mr Mkullo claimed what the mining companies were
given was tax exemptions while in reality it was tax relief, Mr Mwanyika
told The Citizen yesterday.
Following the minister’s move, the mining firms
fought back and managed to convince the government to reinstate the tax
relief, but in 2011, the government, following heavy criticism by Kigoma
North MP Zitto Kabwe, suspended the relief.
“We aren’t asking for a favour…we’re just asking
for what’s due to us according to the country’s laws.” Mr Mwanyika told
The Citizen
SOURCE: THE CITIZEN
He further noted: “During these hard times when gold price has
plummeted, we aren’t asking for bailout…we’re just asking for refund to
cushion us against the current financial crisis.”
“What we need is a written legal agreement that
states clearly that the government has committed itself to give us our
tax refund so that our investors and shareholders can understand what’s
happening.” Mr Mwanyika added.
A senior officer from Tanzania Chamber of Commerce
who requested anonymity told The Citizen: “Taking the government to ICC
would damage the country’s reputation and turn away foreign
investors…not only that, it would also cost the government a lot should
it lose the case.”
The Finance Minister, Dr William Mgimwa wasn’t available to comment on the matter.
