FORMER Chief Secretary who is currently the country's Ambassador to World Trade Organization and other United Nations specialized trade agencies in Geneva, Switzerland, Marten Lumbanga was among hundreds of distinguished personalities who attended Global Smart Partnership Dialogue held in Dar es Salaam.
"Natural resources especially minerals are not contributing significantly to the country's gross domestic product, what can we do better so that our natural gas discovery should contribute sufficiently to GDP?" asked Mr Lumbanga as British oil and gas expert, Donnel O'Neil moderated a session on extractive industries during the GSPD.
Lumbanga, the Chief Secretary during the tenure of the third-phase government which presided over the signing of many mineral development agreements (MDAs), said during those years the government had to give in more to foreign investors because the country's investment climate was not conducive.
Dr O'Neil said the most important thing now is for Tanzania to put in place a strong fiscal regime which will ensure that natural gas companies pay requisite taxes and royalty. "During my years at Shell, I worked in Britain, Norway and Netherlands among many other countries.
These countries have a very strong fiscal regime for oil and gas companies and have no nonsense when one evades taxes," he noted. As the GSPD conference was coming to an end and with the arrival of US President Barrack Obama, another very important event was taking place also in the commercial capital at a low profile.
Tanzania Extractive Industry Transparency Initiative (TEITI) Chairman, Justice Mark Bomani was launching the 3rd extractive industries report covering the year ending June 211. According to the TEITI report, only two gold mining companies paid corporate tax and they include Resolute Resources Limited and Geita Gold Mine which paid only 10 million US dollars against the required 57 million US dollars.
"The company said it traded off part of its VAT refunds at TRA," said Juvinal Batambira who is Managing Partner at BDO East Africa who compiled the report. Mr Batambira further unveiled that while GGM whose parent company is AngloGold Ashanti claims to have paid corporate tax, another giant miner, Barrick Gold Corporation which trades locally as African Barrick Gold has paid no penny in corporate tax.
In fact, Barrick which is the world's largest gold miner and the largest gold miner in the country with four mines, including Buzwagi whose controversial signing in 2007, may close down three of its mines without paying a dime in corporate tax.
"We are calling on the government to find a legal way and negotiate with the company to start paying corporation tax," said TEITI Chairman, Justice Bomani. He pointed out that while MDAs were signed in 1990s when an ounce of gold was fetching 280 US dollars (456,814/-) at the world market, the current price has increased to over 1,200 US dollars (over 1.9m/-) after peaking over 1,600 US dollars a year ago.
"The government should also introduce windfall tax because gold price have appreciated so much at the world market," Mr Bomani who chaired Mining Sector Review Commission in 2009/10, argued.
Barrick which operates Bulynhulu, North Mara and Pangea gold mines, in fact has a colossal 1.3bn US dollars as debt backlog which has to be repaid by not paying corporate taxes until such time that the sum is exhausted. According to the 3rd TEITI report, despite mining companies' earnings increasing to over 3.7trn/- in 2011, they only paid 497bn/- as revenue to Treasury.
"Windfall tax was introduced in the UK when oil prices increased dramatically a few years ago. In Australia recently, the government introduced a 28 percent windfall tax when gold prices also increased," argued the former Chief Justice. Justice Bomani pointed out that even the royalty of 4 percent being charged by the government on gold is far too low compared to 10 percent charged by Botswana.
"Tanzania's royalty rate is still modest compared to many countries including Botswana," he noted as stakeholders were shocked to learn that Tanzania Revenue Authority (TRA) owes mining companies over 200bn/- in VAT refunds.
Tanzania Chamber of Minerals and Energy, Emmanuel Jengo dismissed talk of the need for a windfall tax saying 60 percent of the gross earnings cover operational costs which many stakeholders questioned. "When gold prices increase, the royalty also increases because it's charged on the volume that is sold so why introduce windfall profit here.
We have to understand that 60 percent of the gross earnings goes to operational costs," argued Mr Jengo. He pointed out that instead of focusing on gross earnings which include operational costs, people should focus on net profits. In addition, said Jengo, TRA owes mining companies over 200bn/- in VAT refunds dating back several years ago.
"We have to be realistic here because the mining sector is doing a lot in contributing to revenue," he pointed out while noting that mining projects are expensive ventures requiring billions of shillings of investment. That mining companies like Barrick are ripping off the country is an open secret.
Tanzania Petroleum Development Corporation (TPDC) Managing Director, Yona Kilagane summed up his frustration with mining companies during the GSPD extractive industry session. "These guys have very good plans when they first come to invest promising to break even after three to five years but then post losses for several years," Mr Kilagane said while suggesting that most of the losses posted are questionable.
"If you are making losses why continue investing in the country, why don't you close down?" he wondered in frustration as TEITI's latest report clearly shows that Barrick which claims to have made colossal losses shows no sign of closing shop despite the burden.
In fact, the gold miner lured former Energy and Minerals Minister, Nazir Karamagi to a London hotel to sign another MDA for Buzwagi gold mine under terns similar to Bulyanhulu, North Mara and Pangea ahead of President Jakaya Mrisho Kikwete's formation of the Bomani Commission which led to the amendment of the 1997 Mining Act.
According to the TEITI report covering a period of June 2011, cement manufacturers of Tanzania Portland Cement Company, Tanga Cement Company and Mbeya Cement Company are the only ones paying corporate tax since their establishment while Pan African Energy Tanzania and Resolute Resources also paid the tax for the first time since starting gas extraction and gold mining in the country.
Barrick will likely join Resolute Resources which paid 37.2bn/- in corporate tax for the last two years of its operations at Nzega Golden Pride gold mine which has since wound up business after 16 years of operations.