Starting this July, the Uganda Government will levy a 5% tax on the value of a kilogram of processed gold that is exported out of Uganda, and 10% on unprocessed gold due for export. The changes were recently passed in an amendment to the Mining Act, 2003. Gold is currently Uganda’s leading foreign exchange earner.
The new tax is a complete turnaround of President Museveni’s earlier removal of a 5 % royalty on unprocessed gold in 2017 while launching the African Gold Refinery (AGR). At the time, the President sought to limit the smuggling of unprocessed gold out of the country and to encourage Ugandan artisanal miners to sell their unprocessed gold to the refinery without fear of paying taxes. This triggered a hike in gold exports, with the Central Bank reporting record shipments worth $ 1.25. billion in 2019, more than double what was shipped out of the country the previous year.
However, the new tax will affect artisanal miners and ultimately encourage smuggling, according to some artisanal miners this publication spoke to. The bulk of Uganda’s gold producers are artisanal and small scale.
“That is a very big percentage,” says Basil Oketch, a gold dealer in Abim District. “It is a big miscalculation by the Government and it is going to affect our business,” he adds. “People used to operate openly while the waiver was still on but they are now going to find ways of selling on the black market so that they avoid paying that tax.”
Engidoh Padde, a gold miner from Busia expressed his reservation for the tax as well. “We do not welcome this at all. They have now doubled the taxes,” he said. “Removing the taxes was a welcome idea for us and we were in total support, because we were already paying income tax and a 5% royalty. If they have increased the 5% to 10%, it is now triple taxation. It is not good at all.”
Another gold miner from Mubende District is worried that the new tax will affect artisanal miners’ revenue because buyers will start buying their gold cheaply in order to accommodate the tax. “It is going to bring about low declaration to Uganda Revenue Authority (URA),” argues Emmanuel Kibirige, adding “Smuggling is going to increase, because why would I sell my gold here and be taxed 10% when I can carry it to Kenya and sell it there?”
According to Kibirige, the cost of gold extraction is too high and yet this is not considered when taxing. “It is useless to spend more on production compared to what you earn. When the cost of production beats profit, it defeats the whole purpose of working.” Mr. Kibirige notes that only a few artisanal miners can sell to the refinery because they (AGR) demand a minimum supply of 100 grams. “One hundred grams is only possible through collective effort, where miners collectively sell their gold as a group as opposed to individual basis,” he argues.
According to some sources at the Ministry of Energy and Mineral Development, the Ministry was not consulted before the decision on the new levies was taken.
