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.

Key words: transfer pricing, extractive industry, arm’s length,
anti-tax avoidance