Reports yesterday revealed the mining giant has signed an agreement with Tanzania Revenue Authority (TRA) to start paying an estimated $20m (over Sh40bn) in corporate tax every year.


Reports yesterday revealed the mining giant has signed an agreement with Tanzania Revenue Authority (TRA) to start paying an estimated $20m (over Sh40bn) in corporate tax every year.

The Acacia-TRA agreement was revealed last evening through StockMarketWire.com. There was no indication of when the deal was signed, even though talks have been ongoing behind the scene to finally have the largest mining conglomerate agree to push forward the maturity date for the tax.

The new measure takes effect this year, with the agreement spreading the Acacia payments in sums of $5m (over Sh10bn) each quarter of the financial year. However, according to the agreement that apparently brings forward the maturity date by three years, Acacia will not immediately pay the money, offsetting it instead with a $80m (over Sh160bn) Value Added Tax (VAT) claim against the government. The company owns North Mara, Buzwagi and Bulyanhulu mines. This week, the spokesperson for the ministry of Energy and Minerals, Ms Badra Masoud, revealed that Tuwaka Gold Mine this month paid Sh40 billion ($18.7 million) to offset its outstanding corporate tax dues as more companies lined up to pay their dues.

Despite repeated complaints over non-payment of corporate tax by the seven major gold companies in the country, only Geita Gold Mine (GGM) has been paying corporate tax since 2009. A report by the Tanzania Mineral Audit Authority (TMAA) says that in 2014 Geita paid $43.8 million (Sh97.74 billion).

Tanzania’s Mining Act 2010 changed aspects of taxation, particularly mode of payment of royalty, but mining firms continued to be governed by respective agreements signed before the Act came into force, and which shielded them from corporate tax. Golden Pride Mine, owned by Resolute Mining Tanzania, the first major gold mine in Tanzania, was closed in 2014 after a mine life of 17 years but never paid corporate tax, the TMAA report indicates.

President John Magufuli’s new government is pulling no stops to raise revenue to operate and boost a near bankrupt Treasury.

Barrick agreement

According to tockMarketWire.com, Acacia (Barrick) said the agreement with TRA is the culmination of a process undertaken with the objective of further demonstrating its commitment to Tanzania and reinforcing its relationship with all of its stakeholders.

It reported that the taxable income generated over the three years brought forward would in the first instance be offset by around $80 million, which under the 2011 VAT Memorandum of Settlement ( VAT MOS ) was treated as a prepayment of corporate tax against any of Acacia s operating entities. The VAT MOS amounts will be partially deferred but will still be recovered. For 2016, the targeted amount to be prepaid as corporate tax is approximately $20 million, and that is expected to serve as a basis for the amounts to be agreed and prepaid in future years, until such time as all prepayments and VAT MOS amounts are recovered by Acacia and corporate tax declared becomes fully payable.

The MOU provides for a quarterly payment of tax, this amount being USD5 million per quarter in 2016, the first of which has been made.

Acacia CEO Brad Gordon said: “We proactively initiated discussions with the TRA in 2015 as we believe that our business is of a scale and maturity that it should be paying a fair level of corporate taxes as part of our contribution to the Tanzanian economy. We believe this agreement is mutually beneficial for all parties as we receive greater certainty over future VAT receipts and Tanzania sees an earlier corporate tax contribution from Acacia than previously envisaged. In 2015, our net tax contribution was $109 million (Over Sh218bn) and this agreement will significantly enhance our overall contribution, whilst further strengthening our relationships within Tanzania.”