The Tanzanian government is planning to increase its license fees on the production and export of gold. African Barrick Gold has already agreed to this increase; over the next 14 years the government plans to significantly increase the mining industry's contribution to the country's GDP, and thus expects a corresponding increase in tax revenues.
In several newspaper advertisements yesterday the Tanzanian Ministry of Energy and Minerals announced that it will increase the licenses fees on the production of minerals and other raw materials. These changes will apply to the export of gold, which will be taxed according to a new formula.
Once the law is passed, taxes will be applied to the gross value of the extracted gold instead of the net value. This gross value will be fixed according to the prices per troy ounce at the global markets. Thus, the Tanzanian government expects to collect higher taxes from the country's mining industry. Between 1998 and 2010 Tanzanian gold mines produced about 12.6 million troy ounces of gold. According to the Ministry of Energy and Minerals this gold - together with by-products such as copper and silver - was worth $7.53 billion. Critics have long been censoring Tanzania for not taking the necessary political measures to guarantee professional mining of the country's mineral reserves. Now the government plans to increase the mining sector's contribution to the country's GDP from approximately 3.8% in 2010 to 10% by 2025. Experts consider these plans to be realistic.
Nevertheless, the Financial Market Reform Act passed by the US Congress in July 2010 could cause difficulties. In March the Tanzania Chamber of Commerce and Energy (TCME) already warned the World Gold Council that the new regulations included in the law would have bad effects on Tanzania's mining industry. The law classifies Tanzania, together with nine other African countries, as a country in which minerals are mined in a conflict zone - something which could curb demand for Tanzanian minerals. This is owing to Tanzania's proximity to Congo, but the Tanzanian government questions why it is being equalled to conflict-ridden countries such as the Democratic Republic of the Congo. Ever since its independence in 1961 Tanzania has been largely free of armed conflicts. On the contrary - together with Kenya, Tanzania has enjoyed decades of political stability. Therefore, the Tanzanian government is urging the US government to remove it from this list.
African Barrick Gold, subsidiary of the mining giant Barrick Gold, announced that it has agreed an increase of its gold export license fees from 3 to 4%. Likewise, AngloGold Ashanti, Resolute Tanzania and other mining companies are currently negotiating on increases with the government.
Roman Baudzus is a contributing writer for GoldMoney.
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