An Overview of Transfer Pricing in Extractive Industries in Tanzania

Abstract

The extraction of natural resources such as minerals and petroleum is expected to create a stream of tax revenues to the government. However, Multi-national Corporations (MNCs) in the extractive industry devise several techniques to avoid paying taxes in countries where they operate. One of the techniques adopted by MNCs to avoid tax is transfer mispricing. This article examines the legal mechanisms in Tanzania applied to deal with transfer pricing issues in the extractive sector. In its analysis, the article starts by providing a general overview of the concept of transfer pricing and how it may result into abusive transfer pricing. Then, the article examines the transfer pricing regime applicable to both Mainland Tanzania and Zanzibar. Finally, the article identifies the pitfalls in the Tanzanian transfer pricing regime and recommends the appropriate remedial measures. Keywords: transfer pricing, extractive industry, arm’s length, anti-tax avoidance