By Felix Lazaro, The Citizen Reporter | Sept 29, 2012 Tanzania risks losing about Sh320 billion in mining taxes because of weak legal checks, particularly when it comes to uranium. Local mining experts said yesterday that the country must go back to the drawing board and put in place a watertight policy and regulations before it allows uranium mining. Earnings from the mineral are believed to have the potential to turn around the lives of thousands of poor Tanzanians. The chief concern right now, though, is that some subsidiaries of multinational firms licensed to explore uranium in Tanzania are capitalising on a weak legal and institutional framework to transfer ownership to affiliated companies. In the process, there are missed opportunities to collect revenue. According to a renowned environmental lawyer, Dr Rugemeleza Nshala, the government could lose up to Sh320 billion in unpaid capital gain tax by the ARMZ holding company, which holds a prospecting licence for the Mkunju River uranium project. Speaking at a breakfast meeting organised by the Policy Forum, he cited the example of Mantra Resources-which reportedly changed hands in a span of three years from two connected companies, ARMZ of Russia and Uranium One. "In short, the transfer of Mantra Resources Limited to ARMZ enables its former shareholders to pocket $1.04billion without paying capital gains to the Tanzanian government," said Mr Nshala. ARMZ of Russia owns 79.49 per cent of Mantra Resources. According to the expert, under section 36 (1) of the Income Tax Act, Mantra Resources Limited of Australia was supposed to have paid capital gains tax to Tanzania. The Tanzania Revenue Authority issued a series of demand notices to ARMZ seeking $200 million in capital gains tax and stamp duty, Dr Nshala said. ARMZ has disputed the tax demand and currently has a case pending at the Tax Revenue Appeal Board (TRAB). According to Dr Nshala, after complete sale of the Mantra Resources uranium to its affiliated companies-ARMZ and Uranium One-the company will earn about $250 million annually but will pay just $5 million in taxes, royalties, fees and workers' Pay as You Earn. "This is a very miniscule amount that cannot warrant exploitation of such environmentally harmful minerals," said Dr Nshala. But the minister for Energy and Minerals, Prof Sospeter Muhongo, said his ministry was aware of the concerns but steps have been taken to ensure the country does not lose out on uranium extraction. He added: "I know that so many experts claiming to be competent in the area of uranium and gas will be emerging everyday at this time. I think some of them are just there to create confusion in this sensitive area." Declining to comment further, he said: "I find it difficult to comment on second hand information. You can bring your source with you and address your concerns." In the meantime, Dr Nshala insists that Tanzania stands to gain nothing from the eventual purchase of Mantra Resource Limited by Uranium One from ARMZ in June next year since the two companies are affiliated. This arises from a loophole in the Mining Act 2010, which legally keeps the commissioner for minerals and the minister out of any transaction involving transfer of ownership or price between affiliated companies. "In June 2013, Uranium One will not need to seek and obtain consent from the Commissioner for Minerals or the minister because it is a company that is directly controlled by ARMZ," said Dr Nshala. "The principle is that the country with minerals has to receive a large share from mining activities, otherwise it should not allow the activities to take place," pointed out Dr Nshala. The director of nuclear technology at the Tanzania Atomic Energy Commission, Dr Mwijarubi Nyaruba, said the country has a strong legal framework to manage uranium mining, citing the Mining Act of 2010 and Atomic Energy Act of 2003, but acknowledged that more needed to be done. "The country has yet to set mechanisms to enforce them effectively and clear some of the overriding issues between the two Acts," said Dr Nyaruba. Tanzania will have to work on issues such as how to control dusts, monitor people and ensure self-storage of the processed uranium. It will also have to work on proper waste management and record keeping for future use. Dr Nyaruba is concerned that some stakeholders have been left out and that no clear roles have been assigned to stakeholders. Tanzania needs clear standards and procedures to be taken in the implementation of the uranium mining and also establish accredited laboratories, he added.