Evaluation of taxation efficiency : a case study of Tanzania large scale mining sector.

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Ngowi, Ngalla Amani
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The University of Zambia
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.
Taxation efficiency--Mining. , Taxation--Mining--Tanzania. , Taxation--Mining.