Tanzania Tax and Mining Policy
Client: USAID
Year Completed: 2003

The Tax and Mining Policy Project began in mid-2001 and ended in December 2003, at a time when large-scale gold mining came into production in Tanzania. The ending of the state monopoly and the ensuing mining rush ushered in a period of rapid change for the country. As a subcontractor to Chemonics, IBI worked with the government of Tanzania to analyze the benefits and risks of this new trend. Based on previous studies of the mining sector and its policy context, the Project foresaw the benefits and attempted to mitigate the negative impacts of a mining boom. The contract deliverables were not only met but exceeded in all cases. More importantly, the Project’s impact translated into job creation and poverty reduction in the rural areas of Tanzania.

The project focused on four major areas.

Activity 1: Reviewed the tax policies
This activity focused on building analytical capacity through structured policy dialogue and training. The results were written clarification on issues of conflicting interests, standardization of key procedures and written instructions for officials and the public.

IBI:

  • Conducted three intensive trainings, introducing the Tanzania Revenue Authority (TRA) to international best practices.
  • Introduced computer skills at the working level and standardized key procedures through computerization.
  • Provided training on international accounting standards and mining economics, including actual examination of mining company books. Both the TRA and mining companies were invited to participate in the training to initiate ongoing dialogue.
  • Reduced multiple nuisance taxes that used to be paid at several different collection points, and reduced the cash-flow burden and hassle of VAT refunds.

Activity 2: Reviewed government policy and plans for utilizing income from mining
Under this component, the result was the development of a strategy document for the investment of revenues from mining. IBI:

  • Conducted a Mining Awareness Workshop, sponsored by the Chamber of Mines, aimed to educate the press on mining issues.
  • Conducted a second workshop presenting the mining sector to the parliament, in which the prime minister, minister of energy and minerals, minister of finance and minister for poverty alleviation participated.
  • Produced government revenue projections, which had never existed in Tanzania before,
  • Produced a strategy document for investing government revenues from mining that was released publicly, providing well-researched options for policy makers to consider.

Activity 3: Diversification of economic activities
This activity provided training, technical assistance and market development in mining areas to generate jobs. The results were two-fold. First, the Project developed pilot programs for value-added activities. Second, it assisted in further developing the existing legal framework for the coexistence of small scale and large-scale mining. Under this component, IBI consultants:

  • Conducted various training programs for jewelry craftsmanship to establish the foundations
    of a jewelry industry.
  • Built sustainability into the programs, as trainees paid part of the costs, enough to establish a
    market for in-country trainers.
  • Developed a small-scale mining extension program, achieving significant new business and job creation by the end of the project, as well as designing the framework for the successful and profitable coexistence of small-scale artisanal mining and large-scale commercial mining.

Activity 4: Address environmental concerns
This activity focused on the development of local and national plans for mitigating the environmental impacts of small-scale mining. IBI:

  • Conceived a pilot project and tested approaches to improve environmental practices among artisanal and small-scale mining.
  • Provided effective environmental guidance on controlling water and air pollution from gold and gem processing.
  • Conducted trainings in best practices for 621 miners.