Tanzania's biggest gold miner
Local mining companies have long been suspected of being tax
cheats, causing the government to get less than its fair share of
revenues from the sector.
According to a ruling by the Tax Revenue Appeals Tribunal in Dar es
Salaam, Acacia Mining has been carrying out a “sophisticated scheme of
tax evasion” that effectively enabled it to dodge paying substantial
taxes to the Tanzania Revenue Authority (TRA).
The tribunal has now ordered Acacia Mining to pay over $41.25
million (90 billion/-) to TRA as withholding tax from dividend payments
to its
shareholders, plus an unspecified amount as corporation tax said to
have been dodged by ‘fictitious’ claims of losses at its Tanzanian gold
mines.
Acacia (formerly known as African Barrick Gold or ABG) is the
country’s biggest mining company and owns three gold-producing mines in
northwestern Tanzania - Bulyanhulu, North Mara and Buzwagi.
But over the past few years the firm has not been paying
corporation or withholding taxes to TRA, claiming that it was making
losses from all three gold mines.
Still, the London-headquartered company is understood to have paid
over $412.5 million (901bn/-) as regular dividends to its shareholders
from 2010 to 2013 alone.
This amounts to 10 per cent withholding tax to the tune of $41.25m
payable to TRA, and even more in terms of corporation tax, all of which
were not paid, according to investigations.
A dividend is a payment a company can make to its shareholders only
if it has made enough profit. Corporation tax is revenue charged on
taxable incomes, such as profits, of companies.
“...The fact that none of ABG’s subsidiaries is declaring any
profit that could provide its holding company with such huge net profits
sufficient to distribute to its shareholders four years in a row is
what in our respectful opinion constitutes the evidence of a
sophisticated scheme of tax evasion,” the chairman of the Tax Revenue
Appeals Tribunal, Dr Fauz Twaib, said in the ruling dated March 31,
2016, as seen by The Guardian.
He continued: “Since ABG’s only entities that carry on business
anywhere in the world are the 3 Tanzanian gold-mining companies, ABG’s
only source of revenue that could create net profits or retained
earnings would be the three Tanzanian companies - or one or more of
them.”
“While none of them was allegedly making any profits, and since the
appellant (ABG/Acacia) has no other subsidiary anywhere in the world
engaged in business, one is compelled to further conclude that at least
one, if not more or all, of the appellant’s 3 gold producing subsidies
in Tanzania was making profit. We see no other plausible explanation.”
The ruling sides with a 2011 ruling by the Tax Revenue Appeals
Board, which ordered Acacia Mining to pay the $41.25 million withholding
tax to TRA as tax from shareholders’ dividends.
The company rejected the Board’s ruling at the time and sought
reprieve from the Tax Revenue Appeals Tribunal, which has now dismissed
the appeal with costs.
A TRA breakdown showed that Acacia Mining paid dividends to its
shareholders as follows: $259.5 million (2010), $28.29 million (2011),
$70.12 million (2012), and $54.54 million (2013). The tribunal rejected
the company’s explanation that it was able to pay the dividends to its
shareholders from its distributable reserves and proceeds from an
initial public offering (IPO) in 2010.
“In the circumstances, it is fair to conclude that the respondent’s
(TRA) argument that the transactions were simply a design created by
the appellant (ABG/Acacia) aimed at tax evasion was justified,” said the
ruling.
“One also wonders as to how could part of IPO proceeds, a one-off
event, even if those proceeds were distributable as dividends (which in
law they are not), could explain the payment of four years, back-to-back
dividends to the appellant’s shareholders.”
The tribunal insisted that proceeds derived from an IPO are part of
the capital of the company, not profit, hence not meant to be
distributed to shareholders as dividends.
When contacted by The Guardian for comment, a spokeswoman for
Acacia Mining, Nector Foya, said the mining company would issue a
statement on the tribunal ruling.
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