INTRODUCTION
HakiRasilimali, a Civil Society Organizations (CSOs) platform working on advocacy issues around minerals, oil and gas extraction in Tanzania, is looking forward to recruit a CONSULTANT for the purpose of undertaking a research on “the Implications of the Extractive Fiscal Regime to the Tanzania economy: A case of the Mining Sector ”
TOR FOR THE RESEARCH CONSULTANT
BACKGROUND:
In Sub-Saharan Africa, tax revenues account for less than a fifth of GDP compared to a third of GDP in the Organisation for Economic Co-operation and Development (OECD) countries and the extractive sector represents a unique opportunity to enhance domestic resource mobilization. Globally, taxation is now seen as the most sustainable source of revenue for governments, with the potential to contribute to investments in basic services and to enhance the social contract between citizens and their government. The United Nations handbook (2017)[1] on Extractives Industries Taxation emphasizes that resource rich countries need to balance key issues like attracting foreign or domestic direct investment in the extractives industries, while ensuring the government receives an appropriate share of revenues in order to enhance the contribution of taxes to sustainable and equitable development. According to Bloomberg, 2018, the IMF recently noted that Sub-Saharan African (SSA) countries could increase tax revenue by an average of 5% of GDP if they reform their tax policies[2]. These could include removing harmful tax incentives and exemptions, renegotiating tax treaties that undermine the tax base related to the extractives industry, strengthening tax systems and regional cooperation to curb tax leakages and illicit financial flows that occur as a result of tax avoidance and evasion.
Tanzania is endowed with vast natural resources, predominantly with a lot of minerals (largely characterized with both small and large-scale operations)[1]
Which contribute about 5% of the country GDP. Several efforts have been made by the government to streamline the domestic laws in order to generate more revenue from the extractive sector. These include: the Mining Act 2010 and its amendments, license holders and contractors in the extractive sector are liable to pay taxes including corporate tax (30%), capital gain tax (30%), withholding tax especially on dividends (10%) and other taxes. Profits resulting from transfer or disposal of rights are also subject to taxes, which are collected by the Tanzania Revenue Authority[2].
Therefore, in order to understand the Mineral fiscal regimes and its implication in the Tanzania economy, background description of the mining fiscal regime is inevitable. Since early 1980’s, Tanzania has been undergoing structural economic reforms (from international, regional and National initiatives) all aiming at promoting the country socio-economic development. Thus, triggering for legal and policy reforms in Tanzania such as the development of the National Mineral Policy of 1997, enactment of the Mining Act of 1998 and adjustments in the financial laws that regulate the Mining sector. Further, more reforms were also realized in early 2000s resulting to the enactment of the Mining Act of 2010 and thereafter the enactment of the 2017 Natural
Resources Laws[1]. The main objective of the reforms was centred on creating a better conducive environment to encourage private investment in the sector including the foreign direct investments (FDIs). Furthermore, the role of the government has also been shifted from being sole owner/direct operator to regulator of private investment to having more state control in the natural resource management. With this, the mining sector has been targeted to grow to 10 percent of GDP from 1.5%. A strong, vibrant, well-organized private sector is thus intended to enable this process. In addition, the role of the CSOs will be critical in ensuring oversight and optimal utilization of these revenues generated from the extraction of oil, gas and minerals.
Despite the increase of the Foreign Direct Investment (FDI) in between 1998 to 2008,in 2009 the average annual growth rate of the mineral sector was 13.74% and value of mineral exports increased from US$ 26.66 million in 1997 (less than 1% of total exports) to US$ 1,003.21 million in 2007 (52% of total exports). The situation led to public outcry on the imperative need to increase its contribution through enhancing integration of the mineral sector with other sectors of the economy and having a fiscal regime which maximizes benefits to the national economy.
As a result, the objective of this research is to examine the effectiveness of the mining fiscal regime and its implication for the development of the Tanzania Economy as the country move towards middle income status.
[1] The Written Laws (Miscellaneous Amendments) Act 2017[1] ; the Natural Wealth and Resources (Permanent Sovereignty) Act 2017[1]and the Natural Wealth and Resources (Review and Re-Negotiation of Unconscionable Terms)[1] Act 2017. Mineral processing and its associated issues b. Mineral concentrates and the possible minerals to be found after mineral processing c. Introducing local content requirement which was not covered under the Mining Act before d. Introducing the integrity pledge to be taken by mineral right holders, that they will refrain from corrupt practices as well as pledge to support the country’s campaign against corruption e. Introducing the Executive Secretary to the Commission instead of the Secretary to the Board which has been turned into a commission.
| Main lines of inquiry | Sub lines of inquiry |
| 1. Fiscal rule and fiscal regimes in the mining sector | i. What is the status of the mining fiscal regime- how are the projections, reporting and policy choices?
ii. What is the implication of the current mining fiscal regime for development of the country’s economy? iii. What is the status of the on-going contract negotiations vs revenue projection? iv. What is the future for the Tanzania mining sector? |
| 2. Fiscal Transparency and Accountability
|
i. Since Tanzania has been mining for more than 30 years, how are revenues accrued from the mining sector collected and managed?
ii. What are the challenges facing Tanzania in ensuring transparency and the impact to effective management of revenues from the mining sector? iii. Is there a clearly legal defined framework for the purpose of managing Revenues from the Mining sector? iv. What are the implications for the Non-compliance of the TEITA Act of 2015 regarding public disclosure of extractive contract specifically the Mineral Development Agreements? |
| 3. Sustaining Competitiveness | i. The government is questioned for eroding value and diminishing competitiveness through the political economy while investors are faulted for not integrating projects into the economies of areas hosting extractive-FDIs, negotiating unfair deals, being merely opportunistic and evading tax Conflicting laws and uncoordinated institutions within the sector. How can this be managed for maximum impact? |
| 4. For the purpose of investing for the future | i. For instance section 251 (a) (b) of the Petroleum Act, 2015 provides for the Government to cause for an establishment of a fund into which shall be deposited revenues derived from oil and gas. Nonetheless, there are no specific legislation that provide for the establishment of the fund to tap revenues generated from the mining sector in the country. How does the government plan to enforce this?
ii. What is the risk associated with lack of such laws in the mining sector? |
| 5. Management of the Mining Sector | i. How is the capacity of the government to effectively monitor and regulate the sector?
ii. How can the government strike a balance between under and over-regulation in order to maintain legitimacy in the eyes of the public as well as secure future investments? |
| 6. Environment and climate change | i. To what extent have the mining activities impacted the environment , health and climate change? |
[1] https://www.tanzaniainvest.com/mining/page/4
[2] https://eiti.org/tanzania#tax-and-legal-framework
[1] https://www.un.org/esa/ffd/wp-content/uploads/2018/05/Extractives-Handbook_2017.pdf
[2] https://www.bloomberg.com/news/articles/2018-05-08/tax-reform-could-boost-sub-sahara-revenue-by-5-of-gdp-imf-says
