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Tanzania loses out as Acacia royalties, taxes drop

Tanzania’s earnings from the country’s largest goldminer Acacia Mining Plc last year dropped to $186 million from $214 million the previous year, signalling the impact of its conflict with the John Magufuli administration over taxes.

The Magufuli administration stopped its exports and slapped it with a $190 billion tax bill over underdeclared gold exports.

Acacia paid Tanzania $80.5 million in income tax and royalties in 2017 from its three projects — Bulyanhulu, North Mara and Buzwagi, a 37 per cent decline from the $128 million paid out in 2016.

But as the firm and the government continue negotiations over the tax claim, the miner has scaled down operations in one of its mines.

Indirect taxes

Jaco Maritz, Acacia chief finance officer, said the company’s overall contribution increased by 10 per cent to $202 million in 2017, primarily due to a significant increase in net indirect taxes that are due to be refunded to the company.

“Excluding the impact of the indirect taxes, we saw contributions to our host governments fall by 12 per cent, primarily due to the ongoing dispute in Tanzania, which meant that sales of gold concentrate were significantly lower than the previous year, and ultimately led to the decision to put the Bulyanhulu mine on reduced operations in the fourth quarter. This meant that our overall production fell by 7 per cent year-on-year,” Mr Maritiz said.

“The majority of our contribution continues, however, to be made through joint ventures, where our partner holds the relevant project licences in their name and, as such, we are unable to report on their behalf.

While our contribution to the countries where we are exploring remains small, it is our hope that our interests in these projects will grow and progress over time, with resulting benefits to them in years to come,” Mr Maritiz said.

An audit report of Acacia Mining’s total contributions in Tanzania for 2016 by EY showed that its total direct, indirect, and induced economic contribution in 2017 comprised 33,500 jobs, $345 million of labour income, and $712 million of value added to GDP.

The total of direct, indirect, and induced taxes paid by Acacia, its employees, suppliers, and other linked businesses, Acacia’s total tax contribution in 2017 was an estimated $186 million.

In 2016, Acacia and its employees together paid about $167 million in taxes and royalties.

The firm alone incurred nearly $128 million in taxes and royalties, approximately 80 per cent of which was related to income taxes and royalties, while the remaining 20 per cent was related to unrecovered VAT, Customs and excise taxes, payroll taxes, and other levies.

Of this, $14 million of corporate income tax was to be paid on assessment in 2017. Its employees paid an estimated $39.3 million in taxes.

Last week, the firm’s holding company Barrick Gold, which holds a 64 per cent stake in Acacia, said that they were about to conclude discussions with the Tanzanian government to resolve the dispute and final agreements had been drafted.

“In order to allow the process to continue in an orderly manner and without an arbitrary deadline, the company is not providing a timetable for the completion of the discussions at this time,” Barrick Gold said in a statement.

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