7 February 2013

Tanzania: Dar es Salaam Cannot Rule Out Mining Windfall Tax - Minister

THE government has not ruled out windfall tax in the mining in the event miners reap huge profits from commodity proceeds.

The government announcement comes at a time when, US based analyst firm, Morgan Stanley expects gold to continue rallying throughout 2014, as the Fed continues its bond purchasing programme for the next two years.

Analysts at Morgan Stanley released a report indicating their expectations for gold to average 1,715 US dollars in the first quarter and reaches 1,830 US dollars in the fourth quarter.

On that vein, the Minister for Energy and Minerals, Professor Sospeter Muhongo, said the government considers imposing windfall tax in the mining sector.

The country has been complaining since it passed legislation over two years ago that included rise in royalties on gold exports to 4 per cent of gross value from 3 per cent of "netback" value. Prof Muhongo said the tax regime was not set in stone and the government could offer relief to companies when times were tough. "If they are making losses, will they keep quiet?

When they are going to make huge losses they are going to approach the government," Prof. Muhongo said at the sidelines of an African mining conference in Cape Town. "If they are going to make huge profits, we will also approach them," he said.

When asked if this meant windfall taxes could be introduced, he replied "yes". The country conducted an audit following statistics showing that foreign firms have invested a total of 5 billion US dollars between 1997 and 2010, minerals exports between 2009 and 2011 reaching 4.55 billion US dollars, and the government earning 196 million US dollars in taxes and royalties.

However, total mineral exports between 2000 and 2011 are twice the total investments in the mining sector. The World Gold Council said mining activity is expected to double reaching 1.4 billion US Dollars by 2012-2016. While, gold production was forecast to peak in 2016, with production rising to 1.55 million ounces last year.

The Tanzania Chamber of Minerals and Energy cautioned on the sector's uncertainty in policies that threatens to hinder growth of the extractives sector fuelled by contradicting leaders' statements. Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.

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