SECOND MINERAL REPORT: Govt ‘lost Sh108tr in unpaid mining taxes over 19 years’

Dar es Salaam. The government has lost between Sh68.59 trillion and Sh108.46 trillion from unpaid mining taxes due to under declaration of exports of metallic mineral concentrates by Acacia Mining PLC in the 19 years that the firm has been operating in Tanzania

Prof Nehemiah Osoro chaired the second presidential mining committee that looked into the historical economic and legal aspects of the export of metallic mineral concentrates. He presented his report yesterday to President John Magufuli in a live televised event at State House.

The report found out that between 44,277 containers and 61,320 containers were shipped out of the country between 1998 and 2017 according to customs data from the Tanzania Revenue Authority, but the containers declared by Acacia were less than the customs documents show. The number of containers declared by Acacia were not indicated in the Prof Osoro’s report.

Breaking down the lost taxes Prof Osoro, a seasoned economics professor from the University of Dar es Salaam, said in the 19 years Acacia Mining PLC failed to pay Sh95.5 trillion in Income Tax and Sh94.4 billion in Withholding Tax. Acacia Mining also failed to pay Sh11.1 trillion in mining royalty and Sh1.6 trillion in taxes from underderclared shipping fees.

“The Sh108 trillion that the government failed to collect in taxes could have funded three budgets in accordance to 2017/18 estimates as well as fund the construction of the Standard Gauge Railway (SGR) from Dar es Salaam to Mwanza (853 kilometres),” Prof Osoro said. Prof Osoro said three freight forwarding companies helped Acacia to under-declare its mineral concentrates exports.

Another revelation which was mentioned in the first committee that presented in the report in May 24 that Acacia only declared three types of minerals as forming part of the contents of the concentrates. These are gold, copper and silver. But both presidential committees found out that there were 10 additional types of minerals that had never been declared by Acacia. These mineral types are Sulphur, Iron, Zinc, Nickel, Rhodium, Iridium, Ytterbium, Beryllium, Tantalum and Lithium.

The 10 undeclared minerals exported in mineral concentrates in the past 19 years had the maximum value of Sh58.8 trillion.

Prof Osoro said they found instances of cheating. For example on December 20, 2001 Acacia declared that it had transported 85 containers 20 feet long. However the committee’s investigations found out that actually it was 99 containers that were transported. The mineral concentrate export business is also between Acacia and third parties, the committee has found.

The contracts entered between the two parties have no clauses that guarantee that the government be informed of the transactions.

“Contrary to Acacia reports that the mineral concentrates belong to them, we have found out that the mining firm sells the concentrates to third parties before they even leave the mining sites,” Prof Osoro said, adding that in fact the mineral composition of the concentrates shows that what is exported is not concentrates but a variety of minerals ores.

Prof Osoro also said the information on concentrates given to the Tanzania Minerals Audit Agency are unreliable and should not be depended upon.

Bulyanhulu contract

The Mineral Development Agreement entered between the government and the Bulyanhulu Gold Mines Ltd (formerly Kahama Mine Corporation Limited) in 1994 had a clause that gave the former 15 per cent ownership, according to the findings. However a review was made in 1999 by the late Dr Abdallah Kigoda who was then the minister for Minerals and Energy that removed the 15 per cent government ownership.

The government was paid $5 million for the shares and was to be paid $100,000 annually for the shares.

“My committee could not get any evidence that shows the money, which has reached $6.8 million was being paid. Denying the government an opportunity to own part of Bulyanhulu mine is a lost opportunity for the country,” Prof Osoro said.

Stability clause

The Mineral Development Agreements have stability clauses that guarantee the agreements against any future in mining policy and legislation. “My committee is of the view that no contract or agreement entered in the country should be above state sovereignty and resource nationalism as stipulated by UN Resolution No. 1803 of 1962 and UN Resolution No. 3281 of 1974 on nations’ economic rights and responsibilities. These agreements can, therefore, be renegotiated,” Prof said.

Acacia not registered in the country

Prof Osoro’s committee also found that Acacia Mining PLC was neither incorporated in the country through the Business Registration and Licensing Agency nor acquired the certificate of compliance as required by the Companies Act cap 212.