Gold royalties will be reduced

Govt. to partner with Int’l community to catch smugglers – Pres. Granger

September 16, 2015 | By KNews | Filed Under News, Source

In an effort to stamp out all forms of corruption in the mining sector, President David Granger announced that his government will move to reform the structure for which royalties and other taxes are paid by companies.

Government, in late August, confirmed that a major investigation has been launched into a huge gold smuggling racket that has been negatively impacting the economy.

Giving his take on the matter and what needs to be done to bring this practice to an end, the Head of State opined that gold smuggling has been taking place for several years. It is one of the means of laundering money.

“It is very difficult to prevent it from occurring. What we are doing now in terms of enforcement is tightening the controls of our borders. There needs to be a second look at the tax regime.

If people feel that they can smuggle gold into other countries and they have to pay lower tariffs or lower royalties, then they will do so, but once we modify our  royalties and taxation maybe more people would be encouraged to declare locally,” the President said.

He added, “Those who smuggle gold into more lawful jurisdictions are likely to get caught and severely punished, so many of them don’t try to smuggle into the United Kingdom for example, but the extent to which this happens we will try to establish bilateral agreements so anyone who is discovered will be reported to our jurisdiction.

“So one (measure) is changing the law to ensure there is greater flexibility in the fiscal measures, and second, is improving law enforcements and the quality of the civil service.”

Granger reminded of his intentions to also establish a Public Service College which he hopes will train a new breed of “unbribable” civil servants who are better supervised and remunerated.

“I really feel that a stronger public service will be able to avoid some of the criticisms that we have had with regard to corruption. Guyana’s laws are pretty comprehensive but what we need is a body of law enforcement officers in forestry, mining, countering narcotics and in the police force who will enforce them.

“It’s the human factor that is giving us problems, and I hope that the public service staff college will produce a generation of public servants who are honest and efficient,” President Granger stated.

In recent years, Guyana has been cashing in on high gold prices, with miners and investors taking the risks and plunging headlong into the industry. They borrowed heavily from the banks, used their life’s savings and even took heavy machinery on credit.

Things were looking good, with declarations reaching an all-time high in 2013 – over 481,000 ounces— and with gold earnings reaching an unprecedented US$716M that year.

However, as world prices plunged last year, gold exports contracted 20 percent, with only 387,508 ounces declared to the Guyana Gold Board by licensed traders. Export earnings fell to US$470M.

It was widely believed that scores of miners, disheartened by the price drop on the world market, pulled out, causing production to fall. However, there is emerging evidence that the huge drop is a direct result of a well-organized smuggling racket that involved not only ordinary business persons but also licensed gold exporters. The racket also involves senior officials and key personnel at the country’s airports.

For this year alone, gold declarations have fallen behind 30 percent, when compared to the same period of 2014.

It was one of the major contributory factors that caused the economy to reflect a lower growth rate last year as gold was the biggest foreign currency earner, ahead of rice and sugar. It has fallen behind now.

According to a senior Government official involved in the investigation, the coalition administration was alerted to the situation by the US authorities, since the issue goes way beyond mere smuggling. It also involves money laundering.

This newspaper has since learnt that the US Embassy here in Georgetown has revoked the visas of a number of persons, including businessmen, licensed gold exporters, their workers and even members of their families.

As a matter of fact, the prevalence of gold smuggling has been likened to that of the lucrative drug trade in Guyana, the Government official had said.

Both licensed and illegal gold traders are battling each other to take control of the trade.

The situation has gotten quite worse over the last two years. It is estimated that between 10,000-15,000 ounces of gold per week is being smuggled out via the Ogle and Cheddi Jagan International Airports. Some more is being taken overland to the border at Corentyne to Suriname and via Lethem to Brazil.

At the very least, it means that Guyana is losing out from revenues that can be earned from at least US$500M in gold sales.

It also means that the amount being smuggled annually is more than what is declared to official buyers like the Guyana Gold Board and the licensed traders.

With Guyana charging up to seven percent of the value in royalties and taxes, places like Suriname and Brazil have become attractive markets because of the lucrative profits due to the lower taxes in those countries.

The gold racket has spread its tentacles as far as Belgium in Europe and the Middle East.

According to the official, Government and the Guyana Gold Board have called in the Special Organized Crime Unit (SOCU) to lead the investigations. And it is no wonder – the smuggling racket is highly organized.

Small unlicensed traders have worked out a system using direct flights to JFK International Airport, New York. They would buy up to 100 or 200 ounces of gold. With gold at a four-year low of just over US$1,100 per ounce, the money involved is not chicken feed.

Kaieteur News was told that Customs officers and other security personnel at the airports are tipped off when the traders are flying out. Some would turn a blind eye to what is being taken out.

With regards to the larger licensed traders, the smuggling is even more sophisticated, this newspaper was told.

Official Customs documents are reportedly recycled, with persons being paid off at the airports.

Minister with responsibilities for Natural Resources, Raphael Trotman, recently admitted that a probe involving a number of agencies like the Guyana Gold Board and SOCU is underway.