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Ghana weighs boosting tax on gold

New report urges government to increase its levy on gold mining.

ACCRA, Ghana — For centuries, Europeans stripped Ghana of its gold deposits to such an extent that in colonial times it was known as the Gold Coast.

Now Ghana is considering increasing the tax it levies on all gold production. Ghana could increase its annual earnings by tens of millions of dollars by raising the royalties its charges the mostly foreign mining companies, a new report argues. The funds could be used to boost spending on health and education and help Ghana weather the global financial crisis, said the report by a consortium of charity groups.

The attraction is obvious because gold prices have reached 20-year highs as a result of the global financial meltdown. Ghana's gold output increased by 4 percent in 2008 to 2.6 million ounces. As a result of the rising price for gold, mining revenues increased to $2.3 billion.

Currently mining companies pay royalties of 3 percent of their revenue to the Ghanaian state, but the law allows authorities the flexibility to collect up to 6 percent.

“Certainly it is going to be changed,” said Adomako Baafi, marketing officer of the Ghana Minerals Commission. “It must go up. It is before the Parliament.”

Abdulai Darimani, spokesman for Accra-based Third World Network-Africa Secretariat, suggested that 5 percent is a fair rate for both sides. Just as important, he said, is making sure the new revenue is spent productively.


“We need to have national and regional development strategies within which we can define the role of foreign direct investment and provide terms under which its operation will optimize the development strategy,” said Darimani. “The favorable terms should be offered in relation to how supportive they are to national development agenda.”

Ghana's earning in royalties and corporate taxes from gold mining companies has doubled since 2005 thanks to increased volume and rising gold prices. The royalties brought in about $70 million last year.

A report by several non-governmental organizations, including Action Aid International, Christian Aid and the Third World Network, argues that Ghana could boost tax revenue by an additional $68 million annually by increasing its  royalty rates and improve the government's auditing of multinational companies.

Ghana, as well as other African countries, should reform their tax laws to capture more revenue, which should then be spent on development plans to lift people out of poverty, the report said. The report also urges the government to be more strict in protecting the environment and safety conditions for miners.