By Agumya Allan
On the 25, April, 2023 Members of Parliament of Uganda were up in arms demanding answers from the Minister of Energy and Minerals Hon. Ruth Nankabirwa asking why government had waivered the “$160m” export levy on processed gold. The MPs were wondering how the tax had been reduced from 5% per Kg on processed gold to $200 per Kgs. They accused the Minister and the government of favoring Gold Refining companies at the expense of the local tax payer. MPs opined that Uganda was not benefiting from its gold and that the country needed all these tax arrears collected. Some MPs reached an extent of falsely accusing the Hon.Minister of having connived with gold refineries to waive the tax.
In 2021, Parliament enacted the Mining (Amendment) Act 2021, which reintroduced an Export Levy on Ugandan gold exports. The Act imposed a 5% levy on processed gold and a 10% levy on unprocessed gold however, the Act was silent as to whether the levy was also applicable on gold imported into Uganda for processing and re-export or on gold in transit. Besides the ambiguity, the exporters protested the tax before government and government decided to halt its implementation.
In the meantime, URA decided to enter into Indemnity agreements with gold Refineries as a pre-condition to continue exports on an understanding that whenever an appropriate law is enacted, the gold exporters shall pay the relevant taxes. The government in consultation with some exports later reached an agreement that an export levy of $200 shall be paid on each Kg of Gold exported out of Uganda. What is contentious on this matter is not the $200/kg, 5% or 10% export tax, the impasse is on whether this tax should apply to imported gold for refining or to the locally mined gold.
What transpired in Parliament clearly indicated that the Parliamentarians do not know the nature of gold export business in Uganda. Gold Refining Companies in Uganda operate under a license called a Manufacture Under Bond License, a Manufacture Under Bond license grants refiners permission to process gold from gold importers across the region, refine gold to the desired grade of the importers and to help facilitate re-export of the gold to the importers desired destination.
Meaning gold refineries do not engage in the buying and selling of gold, they only offer refining and export services to gold dealers. To break it down in simple terms, gold refineries are like coffee hulling plants, you take your coffee to a huller, he hulls your coffee and after removing all the rubbish he hands you back your clean coffee. So if a gold importer brings 100kgs to a refinery, say the gold is 88%Au and wants the gold refined to 99%Au, the refineries will refine the gold up to 99% and hand back the remaining refined 89kgs back to the importer at an agreed refining fee. The refineries can also help the gold importers export the gold to his/her desired destination.
The history of gold export taxes in Uganda can be traced back to around February 2017 when the President directed that the 1% fees on un-refined gold imports be removed and the imported gold be solely refined in Uganda and re-exported. The directive was in line with the East African Community Customs Management Act of 2004 which doesn’t allow levies or taxes on goods imported from a Partner or Foreign State for inward processing and export. The reasoning behind the President’s
directive was to encourage the growth of the gold industry, increase foreign exchange and harness direct and indirect benefits associated with the gold refining business in Uganda. Following this directive, more than 7 Gold Refineries have registered in Uganda to date and Uganda’s gold exports have grown from 10.67tons in 2015 to 34.45tons in 2020.
However, the increase in Gold Exports from Uganda doesn’t in anyway imply that the country’s own local gold mines’ production has increased because more than 90% of the gold exported from Uganda is not mined in Uganda BUT is imported from different countries in Africa, processed and exported.
The local artisanal gold miners and small gold companies contribute less than 10% of the total gold exports.
Back to the $160.77m gold tax waiver dispute and why it’s a hoax. At 200$ per kg that is charged by gov’t, it simply means that between July 2021 to date the gold refiners in Uganda exported a total of 800tons (800,000kgs) of gold which is clearly absurd. China, which is the World’s biggest gold producer has only done 701 tons of gold in almost the same period. So this whole $160m dispute between government and Gold refiners is a fat lie because the facts indicate otherwise. The
Parliamentary Committee on Finance, Planning and Economic Development report must have left out some facts off the table because even if gov’t had levied the 5% tax per kg which would be more than 200$/kg, we still can’t have $160.77m collected as taxes. The entire great lakes region has not even produced half of the volume of gold we claiming to have taxed in the same period, so where is this gold we are claiming to demand taxes, coming from?
Some MPs on the floor of parliament like that of Bukuya raised valid questions asking why the people in the gold-rich communities of Bukuya sub county have not benefited from gold in their area. These same sentiments cut across the entire country from Karamoja to Kisoro, with majority of the communities where these mines are located not having any visible impactful developments as a result of hosting these minerals. The answer to this is in the taxation policy in the Mining Law that was recently passed by the same MPs. The previous Law did not address these taxation issues and the new law has still not addressed these issues and therefore, because of this, we are going to continue seeing growing disgruntlement among mining communities that feel are not getting a tangible piece of the
pie from their own local natural resources.
Lastly, these fanciful claims like the $160m gold tax waiver continue to falsely paint the mining sector of this country in bad-light. They give an impression that the mining sector in this country is flourishing yet in actual sense majority of miners across the country are in tears and therefore, as the Miner’s Forum we appeal to Parliament Uganda to come out clearly and help the miners of this country.
Allan Agumya is Vice President, Miners’ Forum.