TANZANIA GOVERNMENT MUST BE VIGILANT TO CHARGE ABG THE CAPITAL GAINS TAX

Posted: August 23, 2012 in Development, Economy
Tags: ,

Dar es Salaam, Tanzania: Tuesday, August 21st 2012

Introduction

Information reached the Coalition of Publish What You Pay (PWYP) in Tanzania since last week is that Barrick Gold (BG) has resolved to sell its 74% stake in the Africa Barrick Gold (ABG) to the Chinese state owned China National Gold (CNG). The media in the United Kingdom (UK) and Tanzania quoted the Barrick Gold and ABG executives as confirming to have started negotiations with CNG, which may culminate in the latter’s total acquisition of the former.

Publish What You Pay Tanzania Coalition Position
Now that ABG prepares to exit the country is something to worry Tanzanians; firstly, it relates to the Government competence to enforce ABG payment of 20% capital gains tax. The capital gains tax refers to gains from the disposal of Tanzanian assets by non-residents, which is charged at 20% on the realised net gains. PWYP-Tanzania is reliably informed of Tanzania Government failure to recover capital gains tax from Placerdome when Barrick Gold bought the goldmines from the former. We remind and urge the Government to set the strategy that will ensure recovery of 20% capital gains tax and corporate tax arrears from ABG simultaneous with CNG acquisition of the ABG goldmines.

Secondly, PWYP-Tanzania is worried whether the Government has grasped lessons regarding achieving the goal of free fiscal regime offers to foreign large scale mining companies. It is perplexing and inconceivable for the Government to offer free tax incentives to richer multinational corporations, than Tanzania – bankrolling the multinationals to make profits and later exit at their will without paying significant taxes to the Government. We remind and urge the Government to immediately change the tax incentive regime offered to foreign mining companies, starting with entry of the China National Gold once it acquires the ABG.

The Tanzania PWYP coalition considers tax incentives offered to foreign large scale mining companies unjustifiable. The coalition looks forward to see a competitively, transparently and accountably transacted ABG/CNG deal.

Background information
ABG is cross listed at the London and Dar es Salaam Stock Exchange Markets with the total value of US$2 billion. Since Initial Public Offer (IPO) launch in March 2010, ABG has only operated in Tanzania where it owns and operates four Large Scale Gold Mining (LSGM) projects in the names of Bulyanhulu Gold Mine Limited, North Mara Gold Mine Limited and Pangea Minerals operating Tulawaka and Buzwagi goldmine projects. Barrick Gold bought Bulyanhulu Gold Mine and North Mara Gold Mine from Placerdome of Vancouver Canada 8 years ago. Barrick Gold is also a Canadian Company. All ABG goldmine projects are in the Lake Victoria zone; the regions of Shinyanga, Kagera and Mara.

The Tanzania Extractive Industries Transparency Initiative (TEITI) reports published in 2011 and 2012 expose ABG’s tax payment history. The reports show ABG does not pay the 30% corporate tax obligation to the Government. A statement quoting ABG Chief Executive Officer, Mr Greg Hawkins, end of March 2011 indicated ABG’s net profit rose 237 per cent during 2010 to US$222.6 million (over 330bn/-) from US$66 million in the previous year – meaning Tanzania would have received US$ 66.78 million had ABG paid its 30% corporate tax obligation. ABG has benefited from the foreign investment incentive package – the free fiscal regime awarded to foreign mining companies.

About Tanzania Publish What You Pay Coalition
The Tanzania Publish What You Pay Coalition is part of the global network of civil society organizations that are united in their call for oil, gas and mining revenues to form the basis for development and improve the lives of ordinary citizens in resource-rich countries. Since it was launched PWYP maintained mass mobilization of civil society organizations to campaign collectively at international, regional, national and local levels for greater transparency in the extractive industries. Since 2002 when it was launched by a group of 6 London-based NGOs, PWYP has evolved into a global network of over 630 civil society organizations, large and small, in 59 countries in Africa, Asia, North and South America, Europe and Australia. National coalitions established in 38 countries, with 23 in Africa, are actively campaigning for extractive industries revenue transparency.

The Concern for Development Initiatives in Africa (ForDIA) hosts the Tanzania Publish What You Pay coalition.

Written by Bubelwa Kaiza

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