By ADAM IHUCHA
Tanzania faces an uphill battle to push through a
legal path in a bid to win a multi-million-dollar tax case against the Russian
state uranium firm.
The state demands nearly $206 million in taxes
from the JSC Atomredmetzoloto (ARMZ), emanating from Mkunju River Uranium mine,
but the mining arm of Russia’s nuclear watchdog, Rosatom disputes the invoice.
As a result, the ARMZ uranium holding through FB
Attorneys had filed a case before the Tax Appeals Tribunal of Tanzania,
challenging the state’s multi-million-dollar tax claims.
The FB Attorneys counsel, Gaudiosus Ishengoma,
confirmed that ARMZ had unwaveringly challenged the Tanzania’s tax demands in
the Tax Tribunal.
Energy and Mineral Minister, Prof Sospeter Muhongo
told the Parliament that the $205.80 million tax originated from Mkunju River
Uranium mining.
Tanzanian law stipulates that any foreign firm
operating in the country should pay capital gains tax, when exchange hands to a
third party.
The law was enacted in 2011 to seal loopholes in a
tax holiday incentive package, which provides foreign firms to operate tax-free
for their first five years term.
Taking advantage of the law, unscrupulous
companies have been shifting proprietorship after the tax holiday elapses in
order to continue enjoying tax-free.
Mantra Tanzania Ltd, the former owner of Mkunju
uranium mine, in December 2010 ceded the project operations to ARMZ after the
latter purchased the parent company – Mantra Resources of Australia for
$1,043.80 million.
Immediately, after the transaction, the state
through Tanzania Revenue Authority issued the tax invoice, demanding the ARMZ
firm to pay $205.80-million in taxes.
Prof. Muhongo said that $196-million out of the total sum, is capital
gains tax and $9.8-million is stamp duty.
“But the Russian corporation had rejected the tax
claims and taken the issue to the Tax Appeals Tribunal” he said.
The sum in question is equivalent to 43 percent of
the current Health and social welfare budget of Tsh 753.85billion or $471.250
million.
Analysts say whatever the outcome of the tax
battle between the Russian firm and Tanzania could create a bad blood for the
two business partners.
In April this year, Tanzania licensed ARMZ uranium
holding to build the first uranium mine in Mkuju River in the south of the
country.
The license is the first to be granted by Tanzania
under its new mining legislation.
ARMZ chairperson Vadim Jivov says acquisition of the special mining licence was a
breakthrough and a direct result of a two-year painstaking effort at all
levels.
Resources of Mkuju River project are projected at
36 000 tonnes of uranium, with 10 000 tonnes of this amount in the inferred
category.
The average grade is 0.024 percent to 0.025
percent of uranium.
Anticipates to produce 14 000 tonnes of uranium
each year, ARMZ would bring in $448 million investment capital and expects to
create 1,600 jobs.
Preliminary projections show that Tanzania will
rake in $249-million in royalties a year.
The project has also been given the go-ahead by
the World Heritage Committee because Mkuju was expunged from the Selous Game
Reserve, which is a World Heritage Site.
The project will affect about 0.69 percent of the
game reserve.
Senior Geologist Dr. Dalaly Peter Kafumu says that
if all goes well and indeed ARMZ produces 14 000 tonnes of uranium, Tanzania
would rank second world’s biggest uranium producer, surpassing Canada.
At the moment Kazakhstan is a leading uranium
producer in the world, having produced 19,451 tonnes in 2011 and commanding 36
percent of the world's total uranium production, according to the World Nuclear
Association.
Kazakhstan is trailed by Canada, which produced
9,145 tonnes or 17 percent of the total production.
Dr Kafumu, however, warned that lack of technology
and funds to harness the element for domestic energy use, may deny Tanzania an
opportunity to sale its uranium ore on the international market.
However, an environmental lawyer, Dr. Eliamani
Laltaika, raised a red flag against the project, which could lead to the
creation of 60 million tons of radioactive and poisonous waste by the mine
during its 10-year lifespan.
“Mkunju Uranium mining is inherently hazardous,
dangerous, and harmful. Its negative effect to a poor country like Tanzania
outweigh any profit that can ever be accrued” Dr Laltaika told this reporter.
Green activists say the radioactive wastes pose a
serious threat to Selous Game Reserve, which is home to the world’s largest
elephant population and other wildlife.
No proven methods exist to keep the radioactive
and toxic slush and liquids from seeping into surface waters, aquifers or
spreading with the dry season wind into the Reserve.
It remains completely unclear how the company or
the Government of Tanzania will guarantee that the impact of millions of tons
of radioactive and toxic waste will be “limited".
Tanzania, East Africa’s second-largest economy, is
gambling on revenue from the mining sector as a key financier of its medium-
term economic growth plan, which runs to 2016.
The country’s targeting an average growth rate of
8 percent a year.
National Bureau of Statistics shows the mining
sector contributes a paltry 2.8 percent to the country’s gross domestic
product. Earnings from the sector have increased steadily from $1.7-billion in
2005 to $3.6-billion in 2011.
In 2010, Tanzania enacted a new mining law that seeks to ensure the natural resource rich country reaps maximum benefits from the sector.
In 2010, Tanzania enacted a new mining law that seeks to ensure the natural resource rich country reaps maximum benefits from the sector.
The new law increased royalties to five percent
for uranium, diamonds, and uncut gemstones, four percent for gold and all
metallic minerals, three percent for industrial and other minerals, and one
percent for gems.
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