Monday 21 April 2014
 
»
 
»
NEW GOLD TAX PROPOSED

Sudan eyes $1.2bn earning from 2013 oil transit

Khartoum, April 4, 2013

Sudan hopes to collect up to $1.2 billion in transit fees in 2013 after oil starts to flow from South Sudan, and is considering a new tax on gold trade, Finance Minister Ali Mahmoud said.

The African state may also have to raise the official 4.42 rate of the Sudanese pound against the US dollar to match black market rates, he said in an interview.

Landlocked South Sudan, which needs to export its oil through pipelines crossing Sudan, shut down its entire output of 350,000 barrels per day in a row with Khartoum over oil fees last year.

The two countries have now agreed to resume shipments and Sudan hopes to receive $2.4 billion in transit fees annually. But since shipments are expected to start arriving in mid-May, this year's fees are likely to total $1-1.2 billion, Mahmoud said.

"I do not know when the full oil flow will (resume). The shutdown affected the wells ... so at the start it will be less than what is expected.

"It could be half, $1 billion, something like that," he said in Dubai, where he attended Tuesday's meeting of Arab finance ministers and central bank governors.

Gold became Sudan's biggest export product worth $2.2 billion in 2012, partly replacing oil revenue lost after South Sudan's 2011 secession. Mahmoud said the government was studying how it could tap into the lucrative trade with a new tax to help plug its budget deficit.

"We are trying to find a way to impose a tax like VAT (value-added tax) that will increase our revenue. It's a technical issue but we need that because it is huge money.

"This (gold) is produced by the people. They are now getting rich, building houses, they have vehicles, they have everything and it is quite difficult to find a way of taxing them."

A small-scale mining industry, scattered across the vast country of 32 million, and a chain of middlemen complicate efforts to impose the tax, which could be as high as 15 per cent, Mahmoud said.

Currently, budget receipts from gold are very small, Mahmoud said, as they come from a 15 per cent business profit tax paid from traders' commissions. Gold producers pay a 7 per cent royalty.

Sudan's pound rebounded to 5.9 from as low as 7.1 against the dollar on the black market after Khartoum signed the oil transit deal in March, Mahmoud said, adding that a sharp rebound could hurt exports and therefore the state budget.

The official rate "may not be achievable but if we manage to raise the rate of the pound a little bit higher than 4.42, it can come closer to the point of intersection with the current (black market) price of the dollar," he said.

"This needs a technical study by a team from the IMF. After that you will see a possible price to keep the exchange rate stable is maybe 5, something like that, so we will have to raise the official rate."

The International Monetary Fund told authorities last November that the pound's rate should be 5.7 per dollar, Mahmoud said. "But now we have a new situation, we have new facts, we have new resources so it will be different. It needs to be reviewed according to new facts."

He did not elaborate on when the IMF review would take place.

Mahmoud said Sudan would use a $1.5 billion loan from Beijing's state-run China Development Bank to invest in its oil industry, to gradually double its output by 2016.

"We want now to increase our oil output from Sudan so that we don't heavily depend on South Sudan. We expect our output to reach 300,000 barrels per day in 2016," he said.

Sudan's current oil output is 140,000 bpd, Mahmoud said, adding it should reach at least 165,000 bpd and a maximum 180,000 at the end of 2013.

The loss of oil revenues sent Sudan's inflation rate to 46.8 per cent in February, but Mahmoud said it should drop to around 20 per cent by end-2013 and return to single digits by 2015.

More fiscal and currency stability thanks to oil transit revenues should help push consumer price growth down, Mahmoud said, adding that the government aimed to keep its budget gap at 3 percent of gross domestic product this year.

The IMF projected in November, after concluding regular talks with Sudan, that its fiscal gap would narrow to 3.2 percent of GDP in 2013 from an estimated 3.7 per cent last year. Sudan's GDP was projected to shrink 0.6 percent in 2013 after an 11.1 per cent drop in 2012.

However, Mahmoud insisted GDP actually grew last year, by 1.4 percent, and he predicted 3.6 percent growth in 2013. "The driver will be the agriculture sector because we had a good rain season this year."

Aiming to rein in the budget deficit, the government will continue to phase out fuel subsidies, Mahmoud said, but the process will be gradual to avoid fuelling inflation.

"Maybe every month we can remove a little bit, half a pound or a pound," he said adding that the subsidies - which make up around 12 percent of state spending - should be fully removed by mid-2015.

He said Sudan had not received any recent aid pledges to support its budget but expected to get $300-400 million in project-based funds this year, mainly from wealthy Gulf countries.-Reuters




Tags: Oil | Gold | sudan | tax |

More INTERNATIONAL NEWS Stories

calendarCalendar of Events

Ads

Buy high quality China wholesale Health & Beauty , Electronics, Sports & Outdoors , Computers, Video Games, Toys & Hobbies Cell Phones, Automobiles and other wholesale products directly from reliable Chinese wholesalers or Factories on DHgate.com