16 January 2013

Tanzania: Gold Mining Firm Seeks 8bn/ - Tax Ruling Redress

GEITA Gold Mine (GGM) Limited has gone to the Court of Appeal to challenge the dismissal of its case on payment of over 8bn/- tax to the Tanzania Revenue Authority (TRA).

In the appeal, GGM is asking judges to revise the decision given by the Tax Revenue Appeals Tribunal on October 1, 2012 under Chairmanship of Judge Fauz Twaib.

The mining company has advanced four grounds of appeal, alleging, among others, that the Tribunal erred in law in making a contradictory finding regarding tax assessments. In its decision, the Tribunal had ruled that;

"The mining development agreement between GGM and the government was binding, but at the same time holding that the Minister for Minerals and Energy had no powers to enter into any agreement which provides fiscal or tax relief under the Mining Act, 1979."

Court records show that GGM, based in Geita Region, was exempted from paying VAT under the Value Added Tax Act, Cap 148 of the Laws (Revised Edition 2006). The company imported fuel which was duty and VAT exempted, part of which it supplied to its two contractors.

The contractors, Geita Power Limited, operated and managed a power plant for GGM and DTP Terrassment, a French Company, provided mining services, including managing and maintaining the GGM's mining fleet, digging mineral rock, hauling mining rock to crusher and waste to the dump site.

The TRA Commissioner General conducted a tax audit on GGM. Pursuant to that audit, the Commissioner General concluded that the company's supply of fuel to its two directors was not VAT exempt. He, therefore, raised VAT Tax assessment notice, requiring GGM to pay 8,111,465,531/-.

Having been aggrieved by the assessment, GGM appealed to the Tax Revenue Appeals Board in 2006. But the Board ruled in favour of the Commissioner's position. The mining company was also dissatisfied by such decision and decided to cross over to the Tribunal.

However, in its judgment, which is sought to be challenged before the Court of Appeal, the Tribunal upheld the Board's ruling. "All persons entitled to VAT relief under Section 11 of the VAT Act are listed in the third schedule thereto. Contractors providing services to mining companies are not among them," reads part of the judgment.

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