Gold smuggling prompts government to rethink export tax – Bloomberg
Ghana is reconsidering a tax that’s spurred an increase in gold smuggling from small mines, a trend that’s depriving the country of much-needed revenue.
The continent’s biggest gold producer saw its output slump 14% in 2020 after coronavirus-related restrictions slowed operations and a tax on the exports of small-scale producers was introduced. The output of these miners, which extract a third of Ghana’s gold, is set to fall further this year, according to the state-owned gold and diamond marketer, Precious Minerals Marketing Co.
“We are relooking at the 3% export tax and re-examining the effects on the sector and on the economy,” Finance Minister Ken Ofori-Atta said by phone Friday. “We should announce our final decision in the budget.”
Ghana introduced the levy in May last year in an attempt to maximize earnings from its resources. In recent years, Ethiopia has channeled sales through the central bank to curb smuggling, while Nigeria announced plans to shift informal production into a supervised supply chain. Tanzania and Mali have also taken steps to formalize gold trade.
“We have reason to believe that our gold is leaving illegally outside the country,” PMMC Chief Executive Officer Nana Awuah said in an interview. “Since the enforcement of this tax there has been a drastic decline in export volumes” through the state marketer.
Before it came into effect, the West African producer would export an average of 5 tons of gold from small mines per month, said Awuah. “Now we don’t get even 1 ton in a month and the figures keep dropping,” he said.
Adding value
Ghana saw slower-than-anticipated growth in the second quarter of the year, with the extractive sector shrinking 19% compared to a year earlier. Such revenue losses could make it harder for the country to fund its budget deficit, which is expected to return within the legislated threshold of 5% of GDP by 2024, after breaching it last year.
Ghana is also seeking to process the metal locally and sell refined gold.
Royal Ghana Gold Refinery Ltd., the first state-owned refinery, is set to start operations in December with a processing capacity of 400 kilograms a day. It has sought certification from the London Bullion Marketing Association to trade on the international market, Awuah said.
“We intend to start with processing 30% of gold produced here in Ghana,” he said. “The refinery will also serve the West African region.”
