Tanzanian President John Magufuli’s deepening dispute with companies he accuses of being tax cheats is rattling investors and dimming the allure of one of Africa’s fastest-growing economies.
Since taking office in late 2015, Magufuli has been on a drive to increase revenue from natural resources to help fund his industrialization plans. His administration has passed laws enabling it to renegotiate contracts and ordered foreign mining firms to sell stakes on the local stock exchange to increase transparency.
The authorities have hit Acacia Mining Plc with a $190 billion tax bill, curbed its exports and detained a senior employee, and seized gems and questioned staff from Petra Diamonds Ltd., alleging it hadn’t paid its dues.
“In his bid to do some good things like trying to reduce the level of corruption, President Magufuli has often taken steps that have actually gone outside of the formal rules,” Nic Cheeseman, professor of democracy at the University of Birmingham in the U.K., said by phone. “Even people I think who have sympathy for his ends are starting to say that the means of achieving them might do more harm than good. It is a very worrying situation.”
Acacia, whose tax bill and related penalties equate to 180 times its revenue last year, and Petra have denied wrongdoing. Acacia has shuttered some operations in Tanzania until its dispute is resolved. With Magufuli showing no signs of backing down, the closures may have an effect on tax income, deter other investment and stifle an economy that the International Monetary Fund expects to expand an average of 6.7 percent a year until 2021.
For the rest of this article: https://www.bloomberg.com/news/articles/2017-09-17/tanzanian-leader-s-war-for-more-tax-puts-economy-in-firing-line