The two major mining groups, the Guyana Gold and Diamond Miners Association (GGDMA) and the Guyana Women Miners Organisation (GWMO), are calling on the government to reexamine proposed budgetary measures that they say will lead to further decline of local mining.
“The 2017 Budget in its current form spells doom. The mining sector will decline without help,” the GGDMA and GWMO declared yesterday in a joint statement, where they also issued an open invitation to Finance Minister Winston Jordan and Guyana Revenue Authority head Godfrey Statia to accompany them on a familiarisation visit to get a better understanding of mining areas.
They warned that the proposed budget along with a previously proposed 3% reduction in the gold board price for gold can only lead to lower declarations and a decline in the sector that would take the economy into a negative spiral as they argued that there will be no growth without mining.
“We would like to congratulate all the hard working small and medium scale miners, without whose effort the country would have undoubtedly recorded negative growth. Despite the removal of our concessions, gold kept Guyana moving, when all other sectors have slowed down,” they further said.
In the statement, the groups cited Jordan’s budget speech and noted that he himself has recognised that there has been a significant slowdown in investment in the mining sector. They said government has forecasted a 35% growth in the sector in 2016 but careful examination will show that there has been a slowdown in the local small- and medium-scale operations. “This is because of the hardships that the sector faced. Several concessions were removed from the industry. Despite the Minister’s utterances none of these have been returned,” they noted. In 2015, they pointed out, the sector did not have to pay VAT on heavy-duty equipment, matting, spares and other material used directly in the gold mining sector. In contrast, they said VAT was required on heavy-duty vehicles and a phased removal of all other concessions was implemented in 2016. “We cannot do more with less,” they, however, added.
It was noted too that no fuel concession has ever accessed by any local miner in the sector. There was an agreement, the GGDMA and GWMO noted, but they said unrealistic expectations by the Guyana Energy Agency made it impossible to be realised. They said the offer was subsequently taken away from miners and the proposed budget offers no hope for any either.
During his presentation, Jordan had alluded to the threat posed by falling gold prices and the miners’ groups said that they were shocked that despite this recognition, there are no measures to help the industry regain its footing.
They noted that despite the high declaration figures, there are clear signs of decline. “The declarations this year were propped up by the two international companies which contributed 1/3 of the gold won. Our figures indicate that local mining was down,” they said, while adding that despite championing the valiant efforts of miners, Jordan has proposed measures that will hasten the sector’s decline.
Jordan announced a repeal of Section 33E (4) of the Income Tax Act as it relates to the sale of gold or diamond not being taken into account in ascertaining the chargeable income of the persons who owned gold or diamonds. This repeal, he said, seeks to bring these operators within the purview of all the tax laws.
However, the miners’ groups said that for about 30 years, miners have paid their taxes at the source and there was no need to file additional taxes. As a result of Jordan’s proposal, they said they have been given the few remaining days of the year to completely realign the sector. “A sector that, because of its reactive nature and remoteness of operation, has a cash culture. The sector is dominated by non-accountants and people who are more familiar with machines than books. We cannot see how the Government of Guyana expects compliance in such a short time. The cultural norms of the sector prevent us from adjusting to this new measure overnight,” they said.
The GGDMA and GWMO argued that miners cannot be placed on the same level of compliance with coastal-based business, which have ready access to non-cash financial instruments. The move, they added, will target the compliant larger miners and force the small miners, who contribute the bulk of gold production, underground. “Guyana will lose in the long term and our associations will be powerless to convince them to become compliant outside of their capacity,” they added, while urging that Jordan rethink the proposed strategy. “We remind the minster of his statement “one, one dutty build dam.” The men who are supplying the one, one dutty cannot, overnight, comply with your requirements,” they added.
During his presentation, Jordan also announced an increase in the Tributors Tax from 10% to 20%. He had explained that the tax on tributors has remained unchanged since its inception in 1998 and the increase, which is in line with the withholding tax, is the first to removing distortions and multiplicity of tax rates.
The group said they already face “serious objections, personal violence and harassment” from employees who do not wish to have the tax deducted from their salaries. As a result, they argued that to ask for double is exposing operators to even more aggression. “We do not welcome the burden of collecting tax for Guyana Revenue authority (GRA). We are asking the GRA to mount a public awareness campaign to ensure that workers understand that the increase is a GRA requirement. This would prevent many of the altercations in the interior over this matter. It would also help legitimate miners to convince staff not to leave and work with companies who prefer to pay off the books,” they added.
The GGDMA and the GWMO emphasised that without the restoration of concessions, the gold mining sector will see a decline rather than growth. “If the concessions are not restored there will be a definite contraction of production. We will find it difficult to replace aging vehicles (an excavator has a life of 3-5 years in the interior). The sector will see additional downtime due to additional costs for quality equipment and fuel. The sector will see higher costs for startup and upkeep due to additional VAT on items previously acquired at concessionary rates,” they said.
The downturn, they argued, will see a significant spillover effect that will affect every sector of the Guyanese economy. “There will be a fall in production and spending all around. This will make 2017 a very dismal year, one which we feel the government will not be able to tax itself out of,” they said.
Against this background, they suggested that Jordan is not properly briefed about what transpires in the gold and diamond mining areas of Guyana. If he did, they said, he would understand that additional pressures hurt rather than help the industry. As a result, they extended the open invitation to both him and Statia for a familiarisation trip to mining areas. They also urged Natural Resources Minister Raphael Trotman to make urgent and strong representation for the sector and to vehemently object to any measure that would lead to contraction. “This is the opportunity for the minister to demonstrate that he truly understands mining and the culture and pressures miners face,” they added.
