Tanzania says mulls "super tax" on minerals

Reuters News
Posted: Jun 08, 2011 10:08 AM
Tanzania says mulls "super tax" on minerals

DODOMA (Reuters) - Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan, according to documents seen by Reuters.

The move follows similar steps in other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices.

Australia was among the first to consider a hefty resource tax, but it had to climb down from initial proposals for a headline tax of 40 percent after pre-election talks with mining giants like BHP Billiton and Rio Tinto.

"Revenue from the mineral resources will be one of the important sources of financing the medium-term plan. Considering the increasing trend in mineral prices, it is optimal to introduce a super profit tax on the windfall earnings from the mineral sector," the plan, launched by President Jakaya Kikwete late on Tuesday, said.

Worries over the tax helped drag down shares of miners operating in the region including African Barrick Gold, which has four gold mines in Tanzania. At 1301 GMT, its shares were trading at 414 pence, down 8 percent, underperforming a sector battered by recovery concerns.

Shares in AngoGold Ashanti, which also has gold operations in the country, were down 2.6 percent.

"African Barrick Gold (ABG) is not aware of any such plans and has not been involved in any discussions or consultation in relation to this, either as ABG or through the Tanzanian Chamber of Minerals and Energy," the company said in a statement.

"All of our current operating mines are subject to Mineral Development Agreements which guarantee tax and fiscal stabilization for a long-term mining project by reference to the law in force at the effective date of the agreement."

It said MDAs could not be amended without agreement.

Tanzania is set to unveil its 2011/12 budget on Wednesday.

(Reporting by Fumbuka Ng'wanakilala; editing by George Obulutsa)