Evaluation of taxation efficiency : a case study of Tanzania large scale mining sector.
Date
2021
Authors
Ngowi, Ngalla Amani
Journal Title
Journal ISSN
Volume Title
Publisher
The University of Zambia
Abstract
Large Scale Mining Sector (LSMS) in Tanzania is owned by foreign investors who are
operating under Mineral Development Agreements (MDAs) and in the guidance of
Environmental Impact Assessments (EIAs). The study entails to assess taxation
efficiency in LSMS. The main source of revenue for public expenditure is taxation.
Government of Tanzania (GOT) has ventured into allowing foreign direct investments
(FDIs) in the mining sector for the purpose of ensuring that they achieve significant
collections of revenues as taxes to improve the delivery of services to the public. The
main problem is the failure and in some cases blatant refusal of the LSMS to pay
statutory taxes to the GOT.
The research is guided by three specific objectives, the first one being to determine the
amounts and types of minerals mined and the amounts of taxes paid to GOT. Actual
figures of taxes collected or paid were obtained from different sources of payments,
including Tanzania Mineral Audit Agency (TMAA), Tanzania Revenue Authority
(TRA), Ministry of Energy and Minerals (MEM), and Mines Head Offices. All data
were secondary. The second specific objective was to determine statutory types and
amounts of taxes to be paid by LSMS and the cause of failure or refusal to pay taxes to
GOT. This was done by going through Mining Acts and Mineral Policies of the time in
question, and listing all types and amounts of taxes the LSMS were statutorily required
to pay to GOT. The data was also secondary. Primary data was collected through a
questionnaire in five selected mines. The sample size is 100 respondents at a rate of 20
respondents for each mine.
The third specific objective was to propose or suggest what should be done to improve
tax collection from LSMS. This was done by going through two scenarios, namely:
literature review and referring to other countries with a success in mineral tax benefits.
The significance of the study is to provide relevant information for LSMS taxpayers and
GOT policy makers to merge on the understanding pertaining to tax compliance. Both
qualitative and quantitative data analysis (descriptive and inferential) methods were
applied in analyzing the data for achieving the specific objectives one and two. From
the research it has been found that the outcry is genuine. The LSMS was not paying out
many, if not all, deeds they were supposed to pay. There are no genuine excuses for
failure or refusal to pay their dues (taxes). Major conclusion from the research includes:
LSMS in Tanzania has blatantly refused to pay Corporate/Income Tax, LSMS evaded
and avoided paying taxes, Taxation Efficiency is on average (1.2 to 5 %) which is
3.10%. Operating cost was pegged at 70% of the sales value. GOT has no capability and
capacity to collect mineral taxes and other mineral dues.
It is recommended that Tanzania should control and manage her mineral resources so as
to realize economic and social development from tax revenues by: -Publicizing MDA’s:
This will enable the public to comment on them especially through the Parliament
Abolishing ring fencing in all mines: This will make it easier to control costs of
operating the mines. Making accounting currency to be a United States Dollar: To avoid
or reduce inflation of the local currency. Implementing Mineral Resource Rent Tax Act
(MRRTA): To manage production and sales of final products and hence a better
taxation efficiency is achieved
The study further enhances the contribution of knowledge on the respective field study
whereas it serves as the foundation of knowledge for further studies in the future. There
is little control for achieving true figures, be it production, pricing, expenditure and
profits before tax. This study may be for a bigger area like East and Central Africa,
before looking at the African Continent at large.
Description
Thesis
Keywords
Taxation efficiency--Mining. , Taxation--Mining--Tanzania. , Taxation--Mining.