12th April 2016
ACACIA Mining PLC is to pre-pay 20 million US dollars in corporate taxes this year after signing a Memorandum of Understanding with the Tanzania Revenue Authority (TRA) last month in Dar es Salaam.
According to the Acacia’s CEO, Bradley Gordon, this proactive move was initiated by Acacia Mining PLC in recognition of the time the company has been operating in the country.
Acacia Mining, which entered the Tanzania mining sector as Barrick and later as African Barrick Gold 15 years ago has been making profit, according to Mr Gordon, in his internal communication to Acacia staff at the weekend.
However, much as the company has in most cases declared net profit across the mines it owns the fact of the matter is it has not yet recouped the USD 3.8bn it has invested into building and developing the three mines it owns.
Under Tanzanian mining law and the terms of the Mineral Development Agreements between Acacia Mining PLC and the government any profit made is used to offset the initial investment and therefore during that period the company is not required to pay any corporate tax.
Mr Gordon says in elaborating the issue of profit that “when running a business one needs to first exclude all costs from your income before you can declare a profit – the cost in this case is the initial capital cost that has been invested to develop the mines”. “Whilst we make net profits, these are not taxable and our current projections are we aren’t due to pay corporate taxes until 2018”, he says.
According to Mr Gordon, the fact that the MOU between Acacia and TRA has been signed and has been recognised as a pre-payment by all parties makes it clear that in the TRA’s opinion, no corporate tax is currently owed by Acacia and therefore none has been evaded.
In its recent ruling, the Tax Revenues Appeals Tribunal (TRAR) accused the gold mining giant of running a sophisticated tax evasion scheme in the country.
Acacia has since appealed to the Court of Appeal against the ruling asserting that the company’s financial reports conformed to international best practices and were audited by global accounting firms and government organisations.