TANZANIAN MINERAL SECTOR PERFORMANCE, FISCAL BENEFITS AND CHALLENGES

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TANZANIAN MINERAL SECTORPERFORMANCE, FISCAL
BENEFITS AND CHALLENGES

• Hon. Dr. Ibrahim S. Msabaha (MP)
• Minister for Energy and Minerals
• The United Republic of Tanzania
• WORLD BANK FISCAL ISSUES WORKSHOP
• 5th OCTOBER 2006 WASHINGTON DC, USA

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PRESENTATION OUTLINE

• Brief Background of the Tanzania Mineral Sector
• Current Mining Fiscal Regime
• Benefits Derived from Mining
• Need for Mining Fiscal Regime Review
• Ongoing Review of Mining Fiscal Regime

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• Background

Geological Map of Tanzania
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Economic Policy Reforms

• Trade liberalization of the early to mid 1980s
• Financial sector review 1990s
• Measures Aimed at Unlock the Mineral Wealth
• New Mineral Policy, 1997
• New mining and investment laws of 1997
• Financial Laws (miscellaneous amendments) Act of
  1997
• Mining Act, 1998

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II. Current Fiscal Regime

• Corporate Tax 30
• Royalty 3 for Gold, 5 for Diamond, 0 for Cut
  Gemstone
• No Import duties on capital goods for exploration
  and mine development. Cap limit of 5 after 1st
  anniversary of commercial operation
• VAT special relief
• Withholding taxes on dividends, paid out profits,
  and on technical services

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Current Fiscal Regime continued.

• No ring fencing around the mining sector losses
  in one mine can be offset against profits in
  another
• 100 depreciation with additional 15 allowance
• Unlimited loss carried forward

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III. Benefits Derived from the Mineral Sector

• Increased foreign direct investments, over USD
  2.5billion since 1997
• Opening of 6 large scale gold mines since 1998
  with current annual capacity production of 50
  tonnes gold
• 3.5 contribution to GDP in 2005
• Foreign export 42.4 of total exports in 2005

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Increased Production Exports, 1990 - 2005
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Benefits continued ..

• Employment in large scale mining (from less than
  1,000 in 1997 to over 8,000 in 2005)
• Increased royalties revenue (from 707,000 in
  1997 to 21million in 2004)
• Improved development (social and economic) around
  mining areas and
• Improved geological database.
• Administration of the Revenue Collections
• Centralised tax collection and
• Centralised redistribution system.

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IV. Need to Review Fiscal Regime

• Equitable Benefits for Tanzania and Tanzanians
• Expected fiscal benefits not yet realized and
• Needed to address comprehensively poverty
  alleviation issues
• Change of Conditions
• Positive macroeconomic conditions (high prices of
  certain minerals and booming international mining
  industry)
• Stability of political climate and
• Improved datasets on geology and quality of
  geotechnical information.

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V. Mining Fiscal Regime Review Processincorporate
d

• Establishment of Fiscal Regime Review Committee
• Government Consultative Meetings
• Stakeholders Consultative Meetings
  (Consultations between Government and Mining
  Investors) and
• Bilateral Negotiations between the Government
  and Individual Mining Companies (concluded for
  one of the main mining producers)

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Mining Fiscal Regime Review Aims at

• Establishment of a competitive and comprehensive
  fiscal regime that shall allow usage of minerals
  to foster sustainable development
• Reflecting Consultations between Government and
  stakeholders and players
• Reflecting best international practices
  customized to the conditions of Tanzania
• Continue attracting investment for large scale
  gold mines and other minerals
• Improve the performance and impacts of the
  existing artisanal and small-scale mining
  activities

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Presentation has included

• Background of Mineral Sector
• Discussion of Mining Fiscal Regime
• Summary of Benefits Derived from Mining
• Rationale for Mining Fiscal Regime Review
• Work to improve Mining Fiscal Regime

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Concluding Remarks

• Mineral Sector Fiscal Regime Review is intended
  to achieve
• A revised, transparent and competitive fiscal
  regime that can be translated into mining
  operations with equitable sharing of mining
  benefits and
• Retaining existing mining operations and
  attracting more investments

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• THANK YOU