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The final death of mining windfall

  • SOURCE: | qwesa2big
  • mineralsGovernment has put on through since 2012. hold plans to introduce a windfall tax on mining profits,a tax it has been trying to push through 2012.

    The latest move is expected to excite struggling gold firms but could undermine efforts to reduce the country’s budget deficit.

    President John Mahama last week Wednesday told the World Economic Forum in Davos that his government has not been able to implement the policy due to threats from the mining companies to lay—off many workers should the tax be rolled-out.

    “They threatened to layoff workers if we implemented the windfall tax, and because we needed the jobs and you don’t want workers laid-off you are coerced to go along. So these are major issues we have,” he said.
    “…They will not allow us to implement a windfall tax in our country,” President Mahama added.

    Implementing the the windfall regime would mean mining companies being
    compelled to pay an extra 10 percent of their profits to government.

    The Ghana Chamber of Mines had earlier warned that the windfall tax dampens the
    resolve of investors in Ghana’s mining sector.

    The Finance Minister, Seth Terkper, told parliament during the annual budget in November that government would impose the tax, which it has been trying to push through since 2012.

    However, the planned tax highlights tensions between an industry feeling the pinch from a 28 percent fall in gold prices last year and  a government facing pressure over a range of economic indicators.

    These include inflation, which hit a fresh three-year high of 13.5 percent in December, and a budget deficit provisionally expected to land at 10.2 percent for 2013 as well as a weakening currency.

    Ghana’s GDP growth, which plunged to a record low on quarterly basis between July and September last year, may at best be 4.8 percent for 2013 according to a new forecast by the Centre for Policy Analysis (CEPA).

    Economic growth rose by a paltry 0.3 percent year-on-year between July and September – sharply below the 6.1 percent and 6.7 percent growth rates in the second and first quarters ‘respectively and the strong 7 percent expansion in the same period of 2012, said data released by the Ghana Statistical Services.

    Growth could even be lower, at 4.5    percent,    if the fourth quarter data – set to be
    released in April – do not show a    significant    improvement over the prior three months, Dr.    Joe    Abbey,    CEPA’s Executive    Director,    told    the B&FT last week.

    Both    the    GSS’s    report and CEPA’s forecast come as bad news for the government’s efforts    to    narrow    the wide budget gap – seeing that the 2013    fiscal    deficit    of    10.2 percent of GDP forecast in November    depended    on    a
    healthier growth rate.

    With    inflation    rising and the cedi losing value by the day,    Ghana’s    growth
    performance – averaging more than 8 percent since 2008 – had hitherto    remained    the cheeriest    aspect    of the    total economic    picture.    But with GDP faltering, the government will find it more difficult to getthe deficit down and stabilise debt    ratios which    have    been climbing rapidly with the huge

    Toni    Aubynn,    chief executive of the Chamber of Mines,    told    Reuters    that
    government’s decision to delay implementation    is    prudent given market conditions.

    “Our argument has been the    timing,    and    we    believe government has taken the right decision to prevent further losses of jobs,” Aubynn said, adding that    the    tax    could    be reintroduced    later    if    the situation improves.

    “I don’t think this is the final death of windfall profit tax. If companies are making
    windfall profit it’s only fair that they    s h a r e    that    with stakeholders,” Aubynn added.

    Source: B&FT

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