..hivi ni kweli kwamba kamati ya Bomani imekuja na mapendekezo kwamba royalty iongezwe toka 3% mpaka 5%?
..hivi muda wote na mapesa yote waliyotumia that is all they could come up with.
..shame on these ppl. nilitegemea watakuja na suggestions za jinsi gani tutachimba haya madini sisi wenyewe[SERIKALI], badala yake wanatuletea hadithi ya 5% royalty.
Royalty is a special levy on exploitation of the resource. It is a payment to the exploitation of the resource and is normally not considered as a tax in its own. It is wrong to define the benefits of the mining sector to Royalty alone. There are other numerous taxes of more significant.
- Bomani committee recommended two things on royalty. One is the increment to 5% from 3% and two is the change on the formula to calculate royalty. Currently royalty is calculated based on Net-Back Value (price of metal at London Metal Market minus costs of transport, insurance and refinery). This formula is a disadvantage to Tanzania as we do have a control on those costs. So Bomani report recommended the Gross value approach. These are very significant changes to the regime on royalty and it will quadruple the royalty we get based on current production and prices.
There is no country in world charging royalty of 15%. Other countries do not charge royalty at all (eg South Africa).
- Bomani report recommended changes to Income tax act to enable mining companies pay corporate tax, which they dont pay now due to the ammendment passed in 1997 by Parliament to offer mining companies 15% allowance on their unredeemed capital expenditure. This has costed the country USD 883m taxable income and its effect is compounded. A good example is Bulyanhulu mine, the first mine under new law, which as the result of this law will start paying corporate tax in 2019! Bomani report has recommended an ammendment such that it starts retrospectively.
- Bomani report has recommended for ring fencing for tax purposes. Mining companies has a habit of including exploration costs on other projects to operational costs of running mines. This in tax principles is wrong. Tax is applied to an income and its coresponding expenditure. A good example in our country in Buzwagi and Tulawaka mines owned by one company Pangea minerals. The costs of building Buzwagi were included in Tuwalaka and hence reduce the taxability of Tulawaka. As a result, Buzwagi was built by money to be paid as tax from Tulawaka (USD 250M). Bomani report asks for Ring-fencing to ensure we get all the taxes.
- Bomani recommended for greater linakges between mining sector and other sectors of the economy. Our emphasis was also on linkage between Mining sector and electricity sub-sector. Mining companies are producing on their own 45MW of electricity and through that Tanzania gave tax exemptions totalling USD 191m for the last three years on imported fuel. If these mines were connected to national grid TANESCO would have enjoyed economies of scale, get profit and supply cheaper power to the people. Moreover mines wouldnt import fuel and 'dodge' fuel taxes even to fuel their cars!
These are some of the significant changes Bomani recommended. The report is a public document (the first ever report on mining to be open to parliament and public). Go policy Forum website for a simplified version of the report. It is a good read. I am proud to be part of the team under Mzee Bomani.