London-based giant gold mine company, African Barrick Gold Plc (ABG), has been found to have evaded tax for four years consecutively from 2010 and ordered to pay a total withholding tax amounting to 41,250,426 US dollars (about 82bn/-).
In a judgment issued last week, the Tax Revenue Appeals Tribunal noted that ABG, currently known as Acacia PLC, had declared dividends in UK to its shareholders on the income generated from gold mines operated in Tanzania amounting to 412,504,257 US dollars for 2010 to 2013 years of income.
However, it was further revealed that, ABG, which operates Bulyanhulu Gold Mining Limited, North Mara Gold Mining Limited and Pangea Minerals Limited, which operates the Tulawaka and Buzwagi Gold Mines, had declared to have incurred loss in Tanzania, where the three gold mine companies operate.
“Indeed, we share the (Tax Revenue Appeals) Board’s surprise as to how could this be possible,” the Tribunal composed of three members under the chairman of High Court, Judge Dr Fauz Twaib, stated in its judgment dated March 31, 2016.
The tribunal dismissed the appeal lodged by the company to challenge findings of the Board, saying it was inconceivable that ABG could pay so much money in dividends for four consecutive years, while its only assets were the three loss-making entities incorporated in Tanzania that do not make any profit. “The board expected some clarification of this rather strange state of affairs and proof as to how it could be possible.
That proof, unfortunately, was not forthcoming from the appellant and its witnesses and counsel’s explanation fell short of an adequate discharge of relevant burden,” the Tribunal observed.
One important issue and which attracted fierce criticism from the appellant’s counsel stems from the Board’s acceptance of the contention by the Commissioner General of the Tanzania Revenue Authority (TRA), the respondent, that ABG has serious plans to avoid tax.
“In the circumstances, it is fair to conclude that the respondent’s argument that the transactions were simply a design created by the appellant (ABG) aimed at tax evasion was justified,” the Tribunal declared.
According to the tribunal, since the company’s only entities that carry on business anywhere in the world were the three Tanzanian gold-mining companies, the ABG’s only source of revenue that could create net profits or retained earnings would be the three Tanzanian companies.
“We see no other plausible explanation. To borrow the words of Lord Browne-Wilkinson, this tribunal cannot accept to be relegated to a mere spectator, mesmerized by the moves of the appellant’s game, obvious of the end result.
“Ultimately, the fact that none of ABG’s subsidiaries is declaring profit that could provide its holding company with such huge net profit sufficient to distribute to its shareholders for years in a row is what in our respective opinion constitutes evidence of a sophisticated scheme of tax evasion,” the Tribunal held.
The Tribunal, therefore, concluded that the Commissioner General of TRA was justified in invoking his powers under section 133 (2) of the Income Tax Act, 2004 and section 19 (4) of the Value Added Tax Act to register the appellant under the two Acts and issue it with TIN and VRN Certificates.
Source: All Africa