Magufuli gestures for relaxation of tax regime in mining

Wednesday January 23 2019

President John Magufuli addresses a meeting of

President John Magufuli addresses a meeting of mineral stakeholders in Dar es Salaam yesterday. PHOTO | ERICKY BONIPHACE 

Dar es Salaam. President John Magufuli yesterday said it was high time tax regimes imposed on mining sector were relaxed in order to encourage miners to pay tax and reduce chances of tax evasion.

He noted that the current taxes were “unacceptably high”.

During a meeting with the mining stakeholders, government officials and the business community in Dar es Salaam, President Magufuli said, if need arises, he would wish to see the taxes revised down in Parliament under the certificate of urgency.

This comes after a section of miners, under the Federation of Miners Association of Tanzania (Femata) raised their voices against, among other things, an 18 per cent Value Added Tax (VAT) imposed on mineral goods with over 100 million annual turnover. Femata president John Bina said miners were forced to shoulder the burden of taxes, including the 18 per cent of their annual turnovers as VAT, a royalty of six per cent, five per cent withholding tax, inspection and clearance fee of one per cent and service levy (0.3).

“There is no indicative price for minerals produced by small miners. This is due to absence of assured markets,” said Mr Bina who was among several contributors at the meeting held at the Julius Nyerere International Convention Centre (JNICC).

During President Magufuli’s meeting with the mineral stakeholders, organised by the Ministry of Minerals, a section of the stakeholders called for the removal of the VAT and withholding taxes, saying it wold reduce the tax burden and stimulate the mining business.

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In response, President Magufuli sided with the miners and went on to direct Minerals Minister Dotto Biteko and other government officials under him to look into ways of dealing with the matter.

“The government is losing a lot of revenue due to unfriendly taxes in the mining sector. It would have been better if the taxes were a bit low but more players paying them instead of imposing high taxes that are unrealistic,’’ said President Magufuli.

“We have over 6 million investors in the mining business and 600, 000 brokers. All these could contribute through taxes to the country’s economy if they were to operate in friendly environment,’’ he noted.

For his part, the chairman of Tanzania Bankers Association (TBA) Abdulmajid Nsekela said that lack of licences, collateral and shift from one place to another were among factors that commercial banks failed to lend capitals to small scale miners in the country.

He noted that commercial banks were ready to lend small miners provided that they met the conditions set.

“The doors of the banks are open to any small, medium-sized and large scale investors. As lenders we have set up certain requirements. These are what you need to overcome,” said Mr Nsekela.

He urged the small scale miners to form sectorial groups just like those in agriculture in order to make it easy for them to access loan facilities from financial institutions.

He said financial institutions lent Sh357 billion to miners last year compared to Sh306 billion it did in the year before.