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Article

2 May 2017

Author:
IPP Media (Tanzania)

Controller and Auditor General allege mining companies involved in tax avoidance

"CAG slams mining deals, urges rethink of tax code”

Prof Mussa Assad, the Controller and Auditor General (CAG)...[has said] that Tanzania must review contracts and rethink its tax code if it wants to benefit from the extractive industry. Assad said a partial review of existing mineral development agreements (MDAs) signed between the government and large-scale gold mines conducted by his office established that foreign investor companies use several loopholes in the contracts to dodge taxes. "The MDAs were found to have unreasonable terms which undermine public interests such as unreasonable conditions for renewal of licenses, protection against future amendments of laws, unreasonable agreements in foreign currency policies, custom arrangements and unreasonable incentives in tax and accounting treatment of capital expenditures...The government is advised to use sanctity of fundamental clauses which exist in most MDAs to renegotiate the unfavourable contractual terms."

The CAG said he came to that conclusion after personally studying mining contracts between the country's four biggest gold-producing mines - Geita Gold Mine (owned by Anglogold Ashantia) and three mines owned by Acacia Mining Plc - Buzwagi, Bulyanhulu and North Mara. "Significant weaknesses were noted in procedures to enter MDAs, such as government relying on prospecting and feasibility reports conducted by the license applicants without having an adequate mechanism to monitor and verify the submitted reports, therefore impairing the government bargaining position," he said.