An Overview of Transfer Pricing in Extractive Industries in Tanzania

Abstract

The extraction of natural resources such as minerals andpetroleum is expected to create a stream of tax revenuesto the government. However, Multi-national Corporations(MNCs) in the extractive industry devise severaltechniques to avoid paying taxes in countries where theyoperate. One of the techniques adopted by MNCs toavoid tax is transfer mispricing. This article examines thelegal mechanisms in Tanzania applied to deal withtransfer pricing issues in the extractive sector. In itsanalysis, the article starts by providing a generaloverview of the concept of transfer pricing and how it mayresult into abusive transfer pricing. Then, the articleexamines the transfer pricing regime applicable to bothMainland Tanzania and Zanzibar. Finally, the articleidentifies the pitfalls in the Tanzanian transfer pricingregime and recommends the appropriate remedialmeasures.Key words: transfer pricing, extractive industry, arm ' s length,anti-tax avoidance