(ANSA AFRICA) Bulk of mining taxes comes from workers

Bulk of mining taxes comes from workers
15 February 2011
The Citizen

Dar es Salaam: Despite claims of a boom in Tanzania's mining industry, the bulk of taxes paid to the government comprises deductions from the workers' wages and not levies on extracted minerals, it has been revealed.At least 54.5 per cent of the taxes collected from mining, gas and oil companies in the country is being paid by ordinary workers in form of various taxes, according to a new report released here yesterday by the Tanzania Extractive Industries Transparency Initiative (TEITI).

According to the report, the government depends more on labour tax than production by mining companies to boost revenue from the sector.

Commenting on the report, a development analyst criticised the government for concentrating on attracting investment in mining instead of planning the sector's development. "We have established that minerals, gas and oil are not contributing as required to the national income," said Mr Bubelwa Kaiza, executive director of Concern for Development Initiatives in Africa (ForDIA.

He told a mining stakeholders' meeting here yesterday that most of the income attributed to the sector was collected as pay-as-you-earn (PAYE) taxation on wages.

Researchers have established that most of foreign investors in the sector were not contributing effectively to the government revenue, Mr Kaiza asserted.

According to the TEITI report, apart from labour taxes which account for over 50 per cent of receipts from the mining sector, stamp duty contributes a mere 0.3 per cent, mining lease 0.9 per cent and import duty adds 34 per cent. "There are many investment attractions in the mining sector than the profit which is expected to be generated from projects. We are paying more than we get," said Mr Kaiza.

For nearly 50 years of national independence there has been no strong presence of local investors in the exploration and exploitation of minerals, gas and oil deposits in the country. "Investors are always coming from abroad because Tanzanians have neither the technology nor the required capital to run such enterprises which are capital intensive," Mr Kaiza observed.

In his opinion, Tanzania's failure to capitalize on its abundant mineral wealth was due to lack of strong mining policies and information on the part of the government while the population generally was not enlightened about mining issues.

In 2009 Tanzania became EITI candidate country, a preliminary stage towards membership.

Mr Kaiza hailed the report as a very important tool for the development of the mining sector saying "it provides a direction on where the sector is heading to."

The report notes as an outstanding issue the fact that mining companies recorded huge amounts of money paid to the government while the treasury had no evidence to verify receipt of the payments.

"The report shows that no single cent has been paid to the treasury by these mining companies," said Mr Kaiza, suggesting that the government should order investors to deposit their cash in local banks in order to boost the country's economic development.

While the government claimed it received a paltry amount of money, he said it has been established that the Tanzania Revenue Authority (TRA) and the ministry of Energy and Minerals have been collecting taxes from mining, gas and oil companies.

In July 2010 the MSG called on all major mining, oil and gas companies to submit reports on all payments that they made to the Government and its agencies. The companies obliged accordingly within a two-week deadline.

It was revealed last week that over Sh24 billion which mining companies claim to have paid in taxes could not be traced on government books. An audit conducted by Hart Nurse Ltd confirmed that the Government acknowledged receipt of less amount of money than what the companies claimed they had actually paid.

Multi-Stakeholder Group (MSG) of the Tanzania Extractive Industries Transparency Initiative (TEITI) contracted Hart Nurse Ltd to examine the payments made by the major mining and gas operating companies to the government for the period of July 2008 -June 2009. Chaired by retired Judge Mark Bomani, TEITI operates as a local affiliate of global Extraction Industries Transparency Initiatives (EITI). Hart group has established that the extractive companies paid about Sh89 billion to the government, which, in turn, reported to have received Sh64 billion only.

At the launch of the report, Mr Bomani said that copies of the document would be handed to relevant authorities so that the discrepancy could be investigated and ironed out.

In addition, Mr Bomani said the report would be submitted to the Controller and Auditor General's office for further evaluation to establish the causes of such differences in revenues.

But, he said that the reconciler was also making efforts to find out the cause of discrepancy. "After further assessment we will establish whether there were cases of improper accounting, conversion from US dollars into shillings or misuse of the money collected," he added.