Tanzania Will Discuss Proposed Super Tax With Existing Mining Companies

Tanzania will discuss with mining companies already operating in the country how a so-called super-profit tax might be implemented if parliament approves the proposed

levy, Mines Minister William Ngeleja said.

New entrants to the industry would automatically be subjected to the tax if lawmakers backed it, Ngeleja said in an interview today in Dar es Salaam, the commercial capital. The proposed measure is scheduled to be discussed by lawmakers tomorrow in Dodoma, the capital, Stephen Wassira, minister of state in the president?€™s office, said on June 10.

?€œWe can?€™t impose the super-profit tax,?€ Ngeleja said. ?€œIf it is passed, we will negotiate with existing companies on how to go about with it. But it will be an automatic catch for new companies.?€

Tanzania vies with Mali to be Africa?€™s third-biggest gold producer and is the world?€™s only known source of the blue gemstone tanzanite. Last week, the country?€™s Planning Commission published a document that said it may be ?€œoptimal?€ to introduce a super-profit tax in the mining industry as a way to fund a proposed 42.9 trillion-shilling ($27 billion) economic- development plan. It said the levy may be appropriate ?€œconsidering the increasing trend in mineral prices.?€

The commission cited data that showed gold exports from the East African country increased to $1.5 billion, or 7 percent of gross domestic product, from $500 million over the past five years, while annual government revenue from sales of the metal remained at $100 million, or 0.5 percent of GDP.

Barrick, AngloGold

African Barrick Gold Ltd. (ABG), 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 ?€œfiscal stabilization?€ for projects. The accords can?€™t be amended without the company?€™s approval, it said in a statement.

AngloGold Ashanti Ltd. (ANG), 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.

Other companies that have a presence in Tanzania include Bermuda-based Tanzanite One Ltd. (TNZ), and Tanzania Royalty Exploration Corp. of Canada.

Last year, Tanzania?€™s parliament passed a mining law that increases royalties paid on minerals to 4 percent from 3 percent and gave the government a stake in all future projects.

?€œWhen we changed the mining law and increased royalties, we negotiated with the companies and they accepted,?€ Ngeleja said.

Australian Tax

The commission said the proposed super-profit tax is similar to one being implemented in Australia, where a planned 30 percent levy on iron ore and coal profits will earn A$7.7 billion ($8.1 billion) in its first two years, the country?€™s Treasury Department said last month. The tax is scheduled to start in July 2012 after the laws are passed by parliament.

Australian Prime Minister Julia Gillard in July scaled back the original proposal for a 40 percent tax on all resource profits to a levy with a higher threshold that exempts most commodities.

?€œIf we implement the tax, we will not be the first,?€ Ngeleja said. ?€œIt is the practice in many other countries.?€

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 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.

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

To contact the editor responsible for this story: Paul Richardson at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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