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The minerals rip-off !

Discussion in 'Jukwaa la Siasa' started by BAK, Mar 26, 2009.

  1. BAK

    BAK JF-Expert Member

    Mar 26, 2009
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    2009-03-26 07:28:00

    The minerals rip-off !

    By The Citizen Reporter

    A new report detailing how mining companies hide behind the secrecy of their contracts to evade tax, denying Tanzania and other mineral-rich African countries millions of dollars in revenue was unveiled yesterday.

    Though the report compiled by ActionAid, and released in Nairobi, does not give the exact amount of money lost by Tanzania through the suspect contracts, it just goes to confirm the generally held view that the real beneficiaries from the exploitation of the continent's mineral wealth are the international mining conglomerates.

    The report entitled, Breaking the Curse; How Transparent Taxation and Fair Taxes Can Turn Africa's Mineral Wealth into Development, warns that although some reform attempts are being made in Tanzania and Zambia, they could flounder because of the recent crash in international mineral prices.

    In fact, the report adds, governments across Africa are finding that their negotiating capacity against the mining companies has suddenly diminished.

    But in a quick rejoinder, an official of one of the leading mining companies, Barrick Gold, Mr Teweli Teweli, told The Citizen in Dar es Salaam: "It is not true that the mining companies are avoiding paying taxes in Tanzania because they were duly and are regularly audited."

    The report was jointly commissioned and published by ActionAid, Tax Justice Network, ChristianAid, Third World Network and Southern Africa Resource Watch.

    Mr Tundu Lissu and his colleagues in the Tanzania Lawyers Environmental Action Team were involved in the research.

    It says in part: "In Tanzania, only one mining company, AngloGold Ashanti (AGA), had paid corporate income tax by the end of 2008, some 10 years after industrial mining began in the country, in contradiction to the Judge Mark Bomani report's recommendations to the Government to have mining companies pay taxes."

    AngloGold Ashanti paid $1 million (Sh1.3 billion) in 2007, which is roughly between five to six per cent of its sales, and it is the only CIT (Corporate and Income Tax) it has paid since it started its operations, earning a $93 million (Sh120.9 billion) profit between 2002 and 2007. And the company has announced that it will pay the taxes again in 2011.

    Barrick Gold reported a net income of $97 million (Sh126.1 billion) between 2004 and the first half of 2007, but has not yet started paying CIT.

    Speaking to The Citizen, Mr Teweli said: "Barrick is extensively audited by both the Tanzania Revenue Authority (TRA) and the Gold Audit Programme, both government bodies, but with the latter dealing specifically with gold auditing. If they found any cheating it would be odd that they are keeping silent."

    The report, he added, seemed to have based some of its conclusions on the findings of the Alex Stewart Assayers (ASA), "which were faulty and blatant lies, and were rejected by the Government".

    Mr Teweli said the top officials who were involved with Alex Stewart had subsequently been charged with abuse of office, further casting doubt on the report's credibility.

    According to the report, multinational mining companies engage in false accounting to depress profits and force governments to grant them tax subsidies and concessions.

    The firms are known to threaten to pack up and go elsewhere if the governments don't offer them the concessions. The report says that the mining companies also insist that the contracts signed with governments remain secret.

    In Tanzania, between 2002 and 2006, the mining companies exported nearly $2.9 billion (Sh3.77 trillion) worth of gold, the report indicates.

    "During that time, the Government earned $17.4 million (Sh22.62 billion) in royalties, charged at three per cent of the market value minus transport and transaction costs," the report adds.

    If royalties were charged at five per cent, as recommended by a presidential commission, the Government revenue would have risen to $145 million (Sh188.5 billion) over a period of five years.

    ActionAid, an international NGO, which has over the past 30 years assisted the poor in 42 countries, says in the report: "With Tanzania, being one of the 10 poorest countries in the world, this funding could have swelled the government coffers to pay for the essential health, education and other basic services to the people."

    The Government's Budget for 2007/08 envisages spending $48 per person on education, health, infrastructure and water. The $145 million could have paid for over three million people to be provided with these services.

    Those who have already started reforming their old mining tax regimes or renegotiating mining contracts are now facing enormous pressure from companies to reverse the reforms in response to falling international prices, the report adds.

    Finance and Economic Affairs minister Mustafa Mkulo failed to announce new mining taxes, as had been widely expected following the recommendations of the Judge Bomani Commission.

    In his Budget Speech last June, the only tax reform he announced was a new turnover tax of 0.3 per cent on all companies declaring losses for three or more years in a row.

    This measure is aimed at collecting revenue from mining companies in Tanzania, of whom only one, AngloGold Ashanti, has declared a small taxable income since the start of its operations.

    The report also cites the AGA report leaked to the media, which alleged that the country's two largest mining companies, AngloGold Ashanti and Barrick Gold Mine, both overdeclared their losses, which in turn reduced their tax liabilities to the Government.

    If these figures are correct, this has cost the government around $132 million (Sh171.6 billion) in lost revenues between 1998 and 2003.

    Mining companies' most common tax avoidance strategy is mis-invoicing. Trade mis-invoicing occurs when companies either under-declare the value of their exports or overstate the prices of their imports.

    This enables a company to reduce the profits it declares in the country where it is registered as a taxpayer.

    "Mis-invoicing is a common practice, especially in the trade that takes place among associates or between associates and parents of large multinational corporations. This is also referred to as transfer mis-pricing," says the report.

    The report cites recent findings by US-based Centre for International Policy that estimate that between 2002 and 2006, an average of $10 billion (Sh13 trillion) was siphoned out of Africa every year as a result of trade mis-invoicing.

    This is likely to be a huge underestimation, given the lack of trade data in Africa and given that this figure does not count trade invoices between subsidiaries of the same parent group of companies.

    But the report has made various suggestions, some of which include the creation of a new international financial reporting standard that all companies registered on stock exchanges should comply with.

    They will be required to report on their financial operations and remittances to governments and other structures on a country-by-country basis.

    "This will allow citizens and parliaments to monitor the financial flows between parent companies and subsidiaries, and detect tax avoidance practices,� the report points out.

    President Kikwete promised in his inaugural address in December 2005 to review all the mining contracts to ensure that "the nation benefits from the richest minerals available in most parts of the country."

    In November 2007, he announced the formation of a committee to investigate the nature of the mining laws and contacts. There have been four such previous committees; none of their reports has ever been made public.

    The fourth, 'Review of Mining Development Agreements and Fiscal Regime for the Mineral Sector', recommended sweeping changes to mining and fiscal laws and the renegotiation of various mineral development agreements with the mining companies.

    Yet, apart from minor changes to the Buzwagi Agreement with Barrick Gold, none of the recommendations have been implemented.

    Following the review, the President appointed a commission headed by Judge Bomani to review the six mining contracts signed with large mining companies, to analyse the mining tax system, identify and analyse the rights and responsibilities of the Government and investors, as well as the tax provisions in mining contracts, and give recommendations for reforms in the mining sector.

    The Bomani Commission recommended far-reaching reforms to the mining tax regime, including an increase in the gold royalty from three to five per cent and the application of the rates outlined in the substantive law for stamp duties, withholding taxes, local government taxes, import duties (mining-related imports will remain exempt) and fuel levies (except fuel used for electricity generation in the mines).

    Some of these proposed changes are contained in the new Mining Bill, which is expected to be tabled in Parliament in next month's session.
  2. mwakatojofu

    mwakatojofu JF-Expert Member

    Mar 26, 2009
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    waarabu wanafaidika zaid na mafuta yao kuliko sie tunavyofaidika na madini yetu. sasa sijui kwanini hali iko hivyo

    wazungu na makampuni yao hawatuonei. ni ujinga wetu na ubinafsi wetu na tamaa zetu tu. hasa hasa viongoz

    mtu yeyote awe mweusi mweupe au manjano akianzisha kampuni lengo ni kupata faida kubwa kadri iwezekanavyo

    sie ndo mazumbukuku
  3. Kinyambiss

    Kinyambiss JF-Expert Member

    Mar 26, 2009
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    because oil is worth more than shinny rocks..lol and even though they ahve corruption... their resource is worth soo much.. they still get a lot. It runs the world bob! Tanzanite doesnt do ish! Saivi we need to invest more in the exploration and exploitation of energy resources and industrial minerals... hizi gems hazina dili. na mikataba yetu feki.. the govt needs real lawyers and not majambazi.
  4. Lusajo

    Lusajo JF-Expert Member

    Mar 26, 2009
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    Wenzenu wa mafuta wameweka OPEC ( Organization of the Petroleum Exporting Countries) kujilinda na bei zao, sisi waafrika kila mtu kivyake, lazima tutaibiwa sanaa tuu. Na waarabu wanajitahidi na wao wawe na makampuni ya kuchimba wenyewe sisi kila kitu tunataka waongoze wao. Wajinga ndio wal_____)
  5. BAK

    BAK JF-Expert Member

    Mar 26, 2009
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    Niliwahi kusoma ripoti kuhusu Tanzanite, kama sikosei mwaka jana au juzi, kwamba nchi kama Kenya, India na Marekani zinapata faida kubwa kutokana na mauzo ya Tanzanite uklinganisha na sisi ambao ndiyo nchi pekee duniani ambayo tuna madini hayo.