* Mining is major contributor to government revenue
* Gold sector says wants taxes reduced as prices fall
* Ghana is Africa's number two gold producer (Adds background, industry comment)
By Matthew Mpoke Bigg
ACCRA, Nov 19 2013 (Reuters) - Ghana plans to present a mining windfall tax bill to parliament, Finance Minister Seth Terkper said on Tuesday, in a move likely to set up a clash between a hard-pressed industry and government's need for increased revenue.
Ghana is Africa's number two gold producer and the commodity accounted for 27 percent of the country's foreign exchange in 2012 and contributed more than $700 million to state coffers, according to data from Ghana Chamber of Mines.
But the government of President John Mahama is under pressure to show investors it can control a budget deficit forecast at 10.2 percent by the end of 2013 and which the government wants to reduce to 8.5 percent next year.
Terkper's announcement came during Tuesday's annual budget speech to parliament in which he described how government could raise revenue and curb spending.
"A committee is reviewing all stability agreements, incentives and the windfall profit tax that could not be passed in 2012," Terkper said.
"In due course the government will re-introduce the bill in parliament after completion of the consultations with all stakeholders," he said.
A previous bill that sought to impose a 10 percent mining windfall profit tax was introduced in 2012, Terkper said, but it was not considered by parliament and later withdrawn.
The West African state's economic boom is often attributed to its new oil wealth but its gold exports were worth $5.6 billion last year, nearly as much as oil and cocoa combined.
Even so, the industry is feeling the strain this year as a result of a slump in gold prices.
Two of its leading mines, AngloGold Ashanti's Obuasi and Gold Field's Demang mine, operate at a loss. Other mines have closed while the level of mining exploration has dropped, industry leaders say.
To redress the situation, mine executives have urged the government to reduce corporate taxes from 35 to 30 percent and assess royalties on a sliding scale related to profitability so companies that do not make a profit don't pay royalties.
The announcement will hurt an industry that already faces a heavy tax burden because of royalties, income tax, Value Added Tax increased on Friday by 2.5 percentage points to 15 percent, and steep power prices, one mining executive said.
"It would be a disaster. Nobody would come to open a mine in Ghana," said one industry executive who declined to be identified because he is not authorised to speak publicly.
Razia Khan, head of Africa research at Standard Chartered, described Terkper's announcement as "positive" for the overall economy hough she wanted to more detail about its implementation in the context of lower gold prices.
"Ghana has long grappled with how to improve the fiscal take from the mining sector, given the stability agreements in place," Khan said in an email. (Additional reporting by Kwasi Kpodo; Editing by Emma Farge and Daniel Flynn)
source reuters.com
* Gold sector says wants taxes reduced as prices fall
* Ghana is Africa's number two gold producer (Adds background, industry comment)
By Matthew Mpoke Bigg
ACCRA, Nov 19 2013 (Reuters) - Ghana plans to present a mining windfall tax bill to parliament, Finance Minister Seth Terkper said on Tuesday, in a move likely to set up a clash between a hard-pressed industry and government's need for increased revenue.
Ghana is Africa's number two gold producer and the commodity accounted for 27 percent of the country's foreign exchange in 2012 and contributed more than $700 million to state coffers, according to data from Ghana Chamber of Mines.
But the government of President John Mahama is under pressure to show investors it can control a budget deficit forecast at 10.2 percent by the end of 2013 and which the government wants to reduce to 8.5 percent next year.
Terkper's announcement came during Tuesday's annual budget speech to parliament in which he described how government could raise revenue and curb spending.
"A committee is reviewing all stability agreements, incentives and the windfall profit tax that could not be passed in 2012," Terkper said.
"In due course the government will re-introduce the bill in parliament after completion of the consultations with all stakeholders," he said.
A previous bill that sought to impose a 10 percent mining windfall profit tax was introduced in 2012, Terkper said, but it was not considered by parliament and later withdrawn.
The West African state's economic boom is often attributed to its new oil wealth but its gold exports were worth $5.6 billion last year, nearly as much as oil and cocoa combined.
Even so, the industry is feeling the strain this year as a result of a slump in gold prices.
Two of its leading mines, AngloGold Ashanti's Obuasi and Gold Field's Demang mine, operate at a loss. Other mines have closed while the level of mining exploration has dropped, industry leaders say.
To redress the situation, mine executives have urged the government to reduce corporate taxes from 35 to 30 percent and assess royalties on a sliding scale related to profitability so companies that do not make a profit don't pay royalties.
The announcement will hurt an industry that already faces a heavy tax burden because of royalties, income tax, Value Added Tax increased on Friday by 2.5 percentage points to 15 percent, and steep power prices, one mining executive said.
"It would be a disaster. Nobody would come to open a mine in Ghana," said one industry executive who declined to be identified because he is not authorised to speak publicly.
Razia Khan, head of Africa research at Standard Chartered, described Terkper's announcement as "positive" for the overall economy hough she wanted to more detail about its implementation in the context of lower gold prices.
"Ghana has long grappled with how to improve the fiscal take from the mining sector, given the stability agreements in place," Khan said in an email. (Additional reporting by Kwasi Kpodo; Editing by Emma Farge and Daniel Flynn)
source reuters.com
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