ACCRA (Reuters) - Ghana has delayed implementing a windfall tax on mining profits while it considers whether to scrap the proposed levy, the head of the country’s mining regulator said on Tuesday.
The West African nation, the continent’s second-largest source of gold, proposed the 10 percent windfall tax on mining companies’ profits in its 2012 budget as part of measures to boost income to state coffers.
The government also raised the corporate tax rate on miners from 25 to 35 percent for this year.
“There are areas we need to look at carefully to decide whether the windfall tax is the best way to go...It’s a complex tax and we are still weighing the options,” Ben Aryee, chief executive of the Minerals Commission told Reuters.
The International Monetary Fund last year recommended that Ghana, which is also the world’s number 2 cocoa grower and an oil producer, consider raising taxes or introducing new ones to increase revenues.
The Ghana Mine Workers Union had called for a windfall tax in addition to raising the country’s stake in mining projects to enable the economy to benefit from the soaring gold prices.
The Chamber of Mines has publicly opposed the windfall tax, however, saying miners are already overburdened with high operational costs particular to the region.
Mining companies welcomed the re-evaluation of the tax.
“It is very good news for the industry as such because the industry is going through a very tough time. And if you put that extra burden of 10 percent on top of that, some mining companies would not make money,” said Peet Van Schalkwyk, executive vice-president in charge of the west Africa region for South Africa’s Goldfields.
He added that the tax could potentially slow mining investments.
Other major mining firms operating in Ghana include Newmont Mining Corporation and Anglogold Ashanti.
Speaking on the sidelines of a mining conference in the capital Accra, Aryee said the government had delayed collection of the tax and was looking at the possibility that the levy could do more harm than good.
“For example, we are being told that we may lose mining royalties if we started collecting windfall tax, so we thought we needed to tread cautiously,” he said, adding that a final decision on the tax would be taken by the finance ministry.
Newmont and Anglogold Ashanti have been operating under stability agreements, which grant them startup incentives, and which govern tax and royalty rates.
Aryee said the government was in talks with the companies over a proposed review of the agreements, and was also considering an application by Goldfields, the world’s no. 4 bullion producer, for similar benefits.
Ghana produced 1,616,501 ounces of gold in the first half of this year, second only to South Africa on the continent, and state revenues have grown with sky-rocketing world prices.
However, Aryee said the country’s mining resources were being threatened by illegal operators, most of them foreign, who collude with local informal diggers to invade concessions owned by registered firms.
“There are lots of Chinese, Burkinabes and Togolese illegal miners flooding concessions, especially in the northern part of the country,” Aryee said.
He said the Chinese in particular had imported sophisticated equipment to illegally extract gold after paying off local traditional chiefs and others.
“It is a big challenge — a big threat to our environment and the industry’s future,” Aryee added.