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Gold Mining in Ghana

By Charles Kubach, Mine-Engineer.Com

As of January, 2014, Ghana is the 9th largest producer of gold in the world. Gold accounts for 33% of Ghana's exports and mining accounts for 5% of Ghana's Gross Domestic Product. Mining is also the country's largest source of government revenue. So, it is safe to say that to Ghana, the people and government, mining plays a important part in their quality of life and financial well being. Foreign mining companies have invested hundreds of billion dollars in Ghana and provide around $35 billion dollars in revenue each year. For a country rich in natural resources, this is the goose that lays golden eggs.

So why would the government of Ghana want to kill, or discourage the Golden Goose?

Apparently, Ghana has proposed to increase the tax rate for gold mines to 35%, but somehow, the government selects the ones that pay 35% and many other gold mining companies pay 25% or 20%. My guess is those that appear to be the most wealthy, are taxed the most. It is the old Socialist dogma, take money from the wealthy and give to government programs. As the former British Prime Minister, Margaret Thatcher once said, "Socialism always fails when you run out of other people's money". And she was right. If a tax rate were applied to all gold mining companies, evenly, one could, at least, say it is fair, but economically discourages investment and would result in some mines closing.

However, since mining is so important to the economy of Ghana, they should give the gold miners a incentive to invest and pay taxes there. As the Gold Companies have suggested, a sliding scale tax rate, based on the price of gold would actually make sense. When gold is selling for a lot of money, they have a lot of profits and can afford to pay a bit more in taxes. However, when gold is selling for much less, profits are tight, and high taxes may just force them to close or suspend operations, putting many citizens out of their jobs, and resulting in no taxes. In the State of California (USA), high taxes and ridiculous government regulations have all but driven mining out of the state, along with many other industries, for instance.

Most large industrial countries, like the USA would never do this sliding tax scale for gold mining, which is why many American gold companies have mines outside of the USA. Ghana has both the resources and the flexibility to take advantage of a sliding tax rate for gold companies, and increase the investment in their country by foreign gold miners, increase tax revenues, increase jobs, and increase the overall standard of living for it's citizens. Perhaps they should seriously consider enacting a tax law that tells gold mining companies "we want your investment and we want you to pay your fair share of taxes. Come to Ghana."

By Charles Kubach, Mine-Engineer.Com
August 22, 2014

"The sign of a intelligent person is not the realization of all that they know, but rather the realization of all that they do not know" (CHK)

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