TAX INCENTIVES IN TANZANIA

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TAX INCENTIVES IN TANZANIAS MINING SECTOR
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NGOWI, HONEST PROSPER SENIOR LECTURER IN
ECONOMICS MZUMBE UNIVERSITY, DAR ES SALAAM CAMPUS
COLLEGE

• pngowi2002_at_yahoo.com
• 255 754 653 740
• P. O. BOX 20266 DAR ES SALAAM, TANZANIA

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BASIS OF THE PAPER 1 BILLION QUESTION REPORT

• 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

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INCENTIVES OPEN TO MINING SECTOR

• 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

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SPECIFIC TAX INCENTIVES FOR MINING SECTOR

• 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

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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

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BREAKDOWN OF TAXES PAID BY LARGE SCALE MINING
COYS IN 2008

• 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

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EMERGING ISSUES

• 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?

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MANGE TAKK