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Gold Resource Corp Message Board

  • engynear engynear Aug 24, 2012 11:21 AM Flag

    Triple Tax

    Anyone have a problem with the new triple-tax for GORO revenues as relates to your dividend going forward from Q2?

    30% in Mexico.
    35% in the US.
    15% at the individual dividend tax level.

    Gotta hand it to them. This thing they call a "tight capital structure" will pay off wonderfully for the shareholders, going forward.
    But I give the Reid clan major points for chutzpa, as there are no really challenging golf courses in Oaxaca, as there are in Colorado Springs.

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    • This post is a great example of "majoring in the minors" so to speak.
      Many folks cannot make big returns because of these kind of hangups.
      Just my opinion........

    • Engy, you're just ridiculous. U.S. tax law provides for foreign tax credits.

      • 1 Reply to mr.goldbug
      • Not ridiculous at all, Mr. Goldbug.

        GORO is on the hook for the differential between the Mexican and US tax rates on that dividend that they took in ($17.5M), starting in Q2, from the Mexican subsidiary. Prior to this, the funds repatriation was considered a paydown of debt from the sub, and therefore not taxable.
        Foreign tax credit unfortunately does nor help them beyond the above.
        If it did, you certainly would not have seen that jump in tax rate in Q2.

        This, unfortunately is now embedded in the tax structure going forward, since GORO in Colorado, has now run out of debt owed from the sub.
        Management has stated many times that they refuse to look at doing business in the US because of onerous environmental lead time.
        As I have said several times in the past, the company should have been domiciled down in Mexico. Then that dividend would have gone directly to you, the shareholder. Now, beginning this past quarter, your ownership gets dinged every quarter in an extra US tax just to fund that dividend.

        But the execs need to be close to the 1st tee at The Broadmoor, and that is of paramount importance.

    • Kindly compare goro's three tax structures to that of Newmont Mining. Or, are you also critizing NEM??

      • 2 Replies to sambrichsanzo
      • <<Kindly compare goro's three tax structures to that of Newmont Mining. Or, are you also critizing NEM??>>

        Hi Sam:

        You asked the above and I responded speaking of NEM's US production revenues.
        GORO has none. NEM has enough to cover their dividend.
        GORO is forced to repatriate funds from Mexico to pay that dividend.

        Have you looked at the tax rate in Q2 which was a result of the repatriation of $17.5M?
        It was 56%!
        Had management not been forced to repatriate those funds (ie, had they domiciled the exec suite down in Oaxaca rather than in the luxury condo at Carriage Manor Resort in Colorado Springs), then their tax rate would have been approx 39%.

        The fact that management needs to be near the golf course in Colorado Springs is costing shareholders almost $1.5M per quarter in US taxes this year, and likely much more next year, as the first quarter was immune this year.

        This company desperately needs to do a non-Mexico based acquisition for four reasons:

        --to extricate themselves from this onerous triple-tax idiocy of having headquarters in the US.
        --to justify a dilutive follow on stock offering which will give them much needed future cash to pay that dividend in the face of dramtically increasing costs.
        --to take your eye off the ball (and obfuscate the accounting) of the problems in Oaxaca.
        --to whip into a frenzy the non-thinking, bovine retail shareholder base with tales of hyped riches in another part of the world.

        Is it any wonder why Stern Agee raised their price target right after management came clean with their operational problems in Q2?
        Expect Stern Agee to do the deal.

      • <<Kindly compare goro's three tax structures to that of Newmont Mining. Or, are you also critizing NEM??>>

        With pleasure, Sam. Newmont has 26% of their revenues and 35% of their assets in the US.
        How much does GORO have?
        Thought so.

        The revenues and pre tax income out of the US in Newmont are easily covering that dividend they pay their shareholders and they have no need to repatriate cash back to the US to pay the dividend as GORO does.
        ie, no triple taxation as GORO has.

        Next company you'd like to compare to???

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