How extractive companies have boosted government revenue

18May 2016
The Guardian Reporter
The Guardian
How extractive companies have boosted government revenue

Government of Tanzania revenues from the extractive industry have increased by 28 per cent in the year 2013/14, according to the Sixth Report of the Tanzania Extractive Industries Transparency Initiative Transparency Initiative (TEITI) for the year ended 30 June, 2014.

Tanzania government revenue from the extractive industry has increased by 28 per cent in the year 2013/14

According to the report which was prepared by BDO East Africa and released in Dar es Salaam by TEITI, despite the decrease in the number of companies reporting in the sixth report by 10 per cent, government revenues from the extractive sector increased from TZS 956 billion in 2013 to TZS 1,221 billion.

The report says that this significant increase amounting to TZS 265 billion is explained mainly by the increased gold production in the year by 10 per cent as well as payment of corporate tax by Ophir Tanzania (Block 1) Limited of TZS 361 billion.

The TEITI report aims at reconciling the data provided by companies in the extractive sector with the data provided by relevant government ministries and agencies.

The overall objectives of the reconciliation exercise are to aid the government in identifying the positive contribution that mineral resources are making to the country’s economic and social development and to realize their potential through improved resource governance that encompasses and fully implements the principles and criteria of TEITI.

The trend of government receipts from the extractive industry in the six EITI reports extracted from the TEITI reports shows that since the first report in 2009 there has been an increase of total revenue by 854 per cent. This includes gas and mining companies together.

There has been an overall increase from 11 gas and mining companies in 2009 to 59 companies in 2014. However, the report says that total companies selected for audit in 2013 was
65.

Corporate tax paid to the government amounted to TZS 492.490 billion and constituted 42.49 per cent of the revenues collected whereas pay as you earn and SDL contributed TZS 162.885 billion amounting to 14.05 per cent of the total revenue, according to the report.

"The list of extractive companies selected by the Multi Stakeholder Group (MSG) for the 2014 reconciliation exercise included 38 mining companies and 21 oil and gas companies making a total of 59 companies. All companies included in the reconciliation scope have returned their reporting templates, except four," the report reveals.

Four companies which have closed their operations in Tanzania and not physically present in the country did not return their reporting templates. However, the total revenue received and
reported by the government entities from these four companies was TZS 2.5 billion, which amounts to 0.20 per cent of total government reported receipts.

The four companies are Tanzanite One Trading Limited, Songshan Geology Minerals Co. Ltd, Afren Gabon Limited and Siwandu Metal Limited.

The report says that there has been a net difference between payments declared by the extractive companies and the government at the beginning of the reconciliation which amounted to around 1.69 per cent of the total amount declared by the government.

However, according to the report, at the end of the reconciliation, the remaining net difference amounted to TZS 2,428,572,571, amounting to 0.20 per cent of the total payments declared by the government representing the aggregate of the positive (government reporting more).

The report further says that there has been a decrease of 10 per cent in the revenues collected despite the increased gold production because of falling gold prices in 2014. The total revenues reported by the companies was USD 2,146,062,181 in 2014 compared to USD 2,361,169,479 in 2013.

"According to average of gold prices calculated on the basis of monthly figures the average gold prices decreased in 2014 as compared to 2013 from average of USD 1,530.88 to USD 1,264.99 per tray ounce, which is a decrease of 17 per cent.

While the decrease in the minerals revenue is mainly due to decreased gold prices in the year 2014, there was also a decrease in the number of mining companies reporting from 46 companies in 2013 to 38 companies in 2014 because some of these closed operations in Tanzania.

The increase in gas revenues however is mainly due to payment of corporate tax from Ophir Tanzania (Block1) Limited which was a one off payment not expected in the future years.

Ophir Tanzania (Block1) Limited made total payments to the government amounting to TZS 361,938,833,000.00 (30 percent ) being the first in the top ten tax payers list for 2014 followed by Geitau Gold Mining TZS 195,618,242,000 (16 percent), Bulyanhulu Gold Mining TZS 105,602,231,000 (9 percent), Pan African Energy Tanzania Ltd TZS 76,907,992 (6 percent) and North Mara Gold Mine Ltd TZS 66,835,788 (5 percent), respectively.

Other companies in the top ten taxpayers list for 2014 include Pangea Minerals Ltd, Songas Limited, Tanga Cement Company Limited, Tanzania Portland Cement Company Ltd, Statoil
Tanzania AS and Resolute Tanzania Limited.

Tanzania joined TEITI on February 2009 following a recommendation as part of the 2007 Mineral Sector Review Study.

A Multi-Stakeholder Working Group (MSG) was established to lead the implementation of the EITI in Tanzania and comprised of representatives from civil society organizations, extractive companies and the government.