Tanzania's state-run Mining Commission has ordered Tancoal Energy Ltd to pay $10.4 million in back taxes.

The government is accusing the company of underpaying its royalties fee under the country's stringent mining laws over the years.

The commission has accused Tancoal of various forms of misconduct including deliberately misinterpreting the finer details of the royalties clause in the law for their own benefit, and then trying to twist the facts of their ensuing dispute with the commission for public consumption.

Section 87 of Tanzania's 2010 Mining Act requires coal producers in the country to pay a three per cent royalty fee on the market value of their produce at point of sale, refining, or delivery within the country.

According to the commission's chief executive officer Shukrani Manya, the royalty is supposed to also cover the cost of transporting the coal to its final destination.

Contrary to the law
But, Tancoal had been paying the royalty but not the transportation costs, in breach of the law, according to Prof Manya.

The company, a joint venture between Australia's Intra Energy Corporation and Tanzania's state-run National Development Corporation, was recently ordered to rectify this anomaly in future royalty payments and also start paying a one per cent clearance fee on the value of all minerals exported outside Tanzania.

The clearance fee was introduced in the 2017 amendments to the 2010 law as part of sweeping reforms of Tanzania's mining sector under President John Magufuli's government.

According to Prof Manya, subsequent claims of foul play by Tancoal officials prompted the commission to delve deeper into the company's past royalty payments, resulting in the discovery of $10.4 million in accrued arrears pertaining to coal transportation between September 2011 and June this year.

“After verifying all the sales and transport cost figures, it was found that Tancoal is liable to pay $1,103,594 including a 50 per cent penalty for the period September 2011 to June 2014, and $9,305,205 including a 50 per cent penalty for the period between July 2014 to June 2019," said Prof Manya.