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[TD="class: contentheading"]Dar ‘needs a rethink on natural resources'
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[TD="class: createdate"] Wednesday, 29 February 2012 08:06
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By The Citizen Reporter
Dar es Salaam.
Tanzania must lay a solid foundation in managing its newfound natural resources if it is to maximise tax revenue and ensure the country's prosperity, participants at a roundtable discussion were told yesterday.A section of public and private sector officials, led by Prime Minister Mizengo Pinda, participated in the discussion on how to manage the country's abundant resources that include minerals, gas reserves, forestry, fisheries and arable land.
Leading the discussion, Prof Paul Collier of Oxford University said a special tax regime must be put in place to cover the extraction of natural resources. "You cannot tax a mining company, for example, in the same way you tax a manufacturing company," he said. "The government must find creative ways to get maximum revenue from the ‘rent' in natural resources. Creating a separate mining regime that is staffed with well trained personnel is important."
Rent is the value of resources "that are not earned" as it comes from the real value of resources.
As things stand, Tanzania does not have special tax regime for mining companies and other resources. Commissioner Harry Kitilya of the revenue authority was recently quoted saying that TRA's officials were not trained well enough to tax mining firms.
While agreeing with Prof Collier on the importance of taxation, Mr Pinda stressed the importance of ensuring the extraction of natural resources is integrated into the general economy by creating linkages and focusing on adding value to the products. "Tackling the problem of linkages entails recognising the constraints of the local economy and then consciously developing policies, strategies and programmes that respond to the local context," Mr Pinda said.
Finland's ambassador to Tanzania, Ms Sinikka Antila, urged the government to avoid the "resource curse" and put its house in order through proper taxation, value addition and transparency on natural resources management.
"Tanzania is at a crossroads," she added. "On the one hand it has to uplift the people from poverty through quality education and job creation and on the other hand ensure it gets rich through its natural resources."
Prof Collier also said Tanzania is staring at the risk of repeating the "resource-curse" that many African countries have suffered. Charging "super-profit" taxes should be one of the options that the government considers, he added, but it should tread cautiously.
Opposition politician Zitto Kabwe (Kigoma North-Chadema) said the country must invest heavily in building the capacity of its auditors if it is to properly charge companies. "The challenge to getting rent from companies is being able to rightly determine the cost of extracting the resources," Mr Kabwe said. "They can cheat."
The government included a super-profit tax on minerals in its five-year development plan but has yet to start charging it. Mining nations such as Australia have made efforts to introduce a super-profit tax in order to benefit from the current commodity boom.
Prof Collier, who has authored such books as The Plundered Planet and The Bottom Billion, said there was no magic in charging super-profit tax because companies had ways of hiding their profits.
He added: "It is difficult to tax profits because of some accounting procedures that could be applied by mining companies. The issues are complex and require high expertise but the bottom line is to tax what you observe, and this requires significant capacity building."
There has been a public outcry that the country is not getting satisfactory revenue from its natural resources, especially mining. When opening up the sector to foreign capital in the mid-1990s, the country made the mistake of allowing tax holidays through mineral development agreements.
"Never enter secret agreements with individual companies," Prof Collier said. "Transparency is crucial. Auctioning licences to the highest bidder is one of the best options."
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[TD="class: contentheading"]Dar ‘needs a rethink on natural resources'
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[TD="class: createdate"] Wednesday, 29 February 2012 08:06
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[TD]
By The Citizen Reporter
Dar es Salaam.
Tanzania must lay a solid foundation in managing its newfound natural resources if it is to maximise tax revenue and ensure the country's prosperity, participants at a roundtable discussion were told yesterday.A section of public and private sector officials, led by Prime Minister Mizengo Pinda, participated in the discussion on how to manage the country's abundant resources that include minerals, gas reserves, forestry, fisheries and arable land.
Leading the discussion, Prof Paul Collier of Oxford University said a special tax regime must be put in place to cover the extraction of natural resources. "You cannot tax a mining company, for example, in the same way you tax a manufacturing company," he said. "The government must find creative ways to get maximum revenue from the ‘rent' in natural resources. Creating a separate mining regime that is staffed with well trained personnel is important."
Rent is the value of resources "that are not earned" as it comes from the real value of resources.
As things stand, Tanzania does not have special tax regime for mining companies and other resources. Commissioner Harry Kitilya of the revenue authority was recently quoted saying that TRA's officials were not trained well enough to tax mining firms.
While agreeing with Prof Collier on the importance of taxation, Mr Pinda stressed the importance of ensuring the extraction of natural resources is integrated into the general economy by creating linkages and focusing on adding value to the products. "Tackling the problem of linkages entails recognising the constraints of the local economy and then consciously developing policies, strategies and programmes that respond to the local context," Mr Pinda said.
Finland's ambassador to Tanzania, Ms Sinikka Antila, urged the government to avoid the "resource curse" and put its house in order through proper taxation, value addition and transparency on natural resources management.
"Tanzania is at a crossroads," she added. "On the one hand it has to uplift the people from poverty through quality education and job creation and on the other hand ensure it gets rich through its natural resources."
Prof Collier also said Tanzania is staring at the risk of repeating the "resource-curse" that many African countries have suffered. Charging "super-profit" taxes should be one of the options that the government considers, he added, but it should tread cautiously.
Opposition politician Zitto Kabwe (Kigoma North-Chadema) said the country must invest heavily in building the capacity of its auditors if it is to properly charge companies. "The challenge to getting rent from companies is being able to rightly determine the cost of extracting the resources," Mr Kabwe said. "They can cheat."
The government included a super-profit tax on minerals in its five-year development plan but has yet to start charging it. Mining nations such as Australia have made efforts to introduce a super-profit tax in order to benefit from the current commodity boom.
Prof Collier, who has authored such books as The Plundered Planet and The Bottom Billion, said there was no magic in charging super-profit tax because companies had ways of hiding their profits.
He added: "It is difficult to tax profits because of some accounting procedures that could be applied by mining companies. The issues are complex and require high expertise but the bottom line is to tax what you observe, and this requires significant capacity building."
There has been a public outcry that the country is not getting satisfactory revenue from its natural resources, especially mining. When opening up the sector to foreign capital in the mid-1990s, the country made the mistake of allowing tax holidays through mineral development agreements.
"Never enter secret agreements with individual companies," Prof Collier said. "Transparency is crucial. Auctioning licences to the highest bidder is one of the best options."
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