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Gold Fields pained by ‘unfair’ tax-treatment

gfieldsGold Fields Ghana, the country’s biggest miner of gold, has described its lack of a stability agreement with government as frustrating.

Stability agreements, also known as investment agreements, grant preferential tax treatment to beneficiary mining companies by freezing the tax rates that they pay over a long-term period.

Newmont Ghana and AngloGold Ashanti are the only firms that have such agreements with the government, and have been saved the harsh effect of recent hikes in industry taxes.

Gold Fields has been seeking a stability agreement for the past decade without success, while the government, through a committee set up two years ago, has been seeking to review existing agreements.

The company’s Executive Vice President and Head of West Africa Operations, Mr. Alfred Baku, said the situation is particularly disappointing — especially when other companies have similar agreements with government.

Mr. Baku said this when he presented a cheque for US$10.3million to Deputy Finance Minister Cassiel Ato Forson as Gold Fields’ dividend to government for the 2013 financial year.

“The situation is akin to a father with five children who gives preferential treatment to two. We are sure if you were in our position you would feel the same. We would appreciate it if government expedites action and levels the playing field,” he told the Deputy Finance Minister in Accra.

Stressing the point, Gold Fields’ Vice President and Head of Stakeholder Relations David Johnson said:

“The earlier we get it the better. We think it’s only fair because we have been around for a while. Being the largest taxpayer in the sector, we’ve helped this economy”.

The company last year paid almost US$218million in royalties and taxes, and will this year invest over US$180million in its two operations at Tarkwa and Damang.

The stepping-up of its calls for an investment agreement comes as weak gold prices — down by about a quarter since 2013 — put the industry’s revenues under pressure. Miners have been courting government sympathy for their plight, arguing for lower taxes and less stringent investment conditions.

Companies without stability agreements have a corporate tax rate of 35 percent, compared to a ceiling of 32.5 percent set in Newmont’s agreement with government. Mineral royalties for the industry were raised from 3 percent to 5 percent in 2012, compared to a guaranteed rate 3 of percent for companies benefitting from a fixed fiscal regime.

The belief that stability agreements only benefit companies to the detriment of government and communities is highly erroneous, Mr. Johnson said.

“A stability agreement does not mean the country is going to be ripped-off; far from that. What it means is that it gives us a certain level of predictability so that we can prepare a long-term plan.

“The actual content of the agreement will be decided by the parties. Government will make its proposal as well as the company, after which a decision will be taken. It should not be seen as something that is driven by the industry, because government upon consultation with other stakeholders will arrive at a decision.”

By Richard Annerquaye Abbey | B&FT Online | Ghana

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