1. 08.09.2015 TAX INCENTIVES IN TANZANIA’S MINING SECTOR

2. 08.09.2015 NGOWI, HONEST PROSPER SENIOR LECTURER IN ECONOMICS MZUMBE UNIVERSITY, DAR ES SALAAM CAMPUS COLLEGE pngowi2002@yahoo.compngowi2002@yahoo.com; +255 754 653 740 P. O. BOX 20266 DAR ES SALAAM, TANZANIA 1

3.  LEGAL FRAMEWORK FOR TAX EXEMPTION IN TANZANIA u SECTION 17 OF 1997 INVESTMENT ACT u 2010 MINING ACT: ONLY FOR NEW MINING PROJECTS u PRE-2010 MINING INVESTORS HAVE INDIVIDUAL (SECRET) AGREEMENTS WITH THE GOVERNMENT BASIS OF THE PAPER: 1 BILLION $ QUESTION REPORT

4. INCENTIVES OPEN TO MINING SECTOR  HOLDERS OF TIC CERTIFICATE OF INCENTIVES u IMPORT DUTY EXEMPTION ON CAPITAL GOODS u 0% VAT ON IMPORTS u CARRY OVER LOSSES FOR 5 YEARS AGAINST FUTURE PROFIT  EXEMPTIONS FOR INVESTORS IN SEZs & EPZs u CORPORATE INCOME TAX FOR 1 ST 10 YEARS u WHT ON RENT, DIVIDENDS & INTEREST RATE FOR 1 ST 10 YRS u VAT ON UTILITIES ; ALL LGAs TAXES FOR 1 ST 10 YEARS u UNLIMITED REPATRIATION OF PROFIT u INDIVIDUAL FISCAL AGREEMENT WITH GOVT

5. 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 1 ST 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

6. 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

7. 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

8. 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? 3

9. MANGE TAKK