Ghana bows to IMF by hiking mining taxes to 35% from 25%
Mining companies in Ghana will be paying more taxes to government starting 2012, a move which was recommended by the International Monetary Fund (IMF) when a team from the Fund completed a two-week review of the country’s economy October 25, 2011.
The Finance Minister Dr. Kwabena Duffour, who presented the 2012 budget in Accra November 16, 2011, told lawmakers that government from 2012 fiscal year will increase the corporate tax rate for mining firms to 35% from the current 25%.
“Following established practice in the extractive industry, and in the oil and gas sector, the corporate tax rate for mining companies will be increased from the current 25% to 35%,” Dr Duffuor said.
According to the text of the budget, a windfall profit tax of 10% will be collected from all mining companies and “a uniform regime for capital allowance of 20% for five years for mining, as is the case in the oil and gas sector.”
It explained that environmental degradation resulting from mining operations also imposes additional costs on the country.
Late October 2011, an International Monetary Fund (IMF) team led by Christina Daseking on a visit to Ghana made recommendations to government to implore ways of generating more revenues from the mining sector as prices of gold kept rising on the world market.
According to the IMF, the country which is Africa’s second biggest gold producer behind South Africa, is receiving low revenues compared to other countries that also produce the metals.
“On the revenue side, the mission encouraged the government to continue efforts to strengthen tax administration. It also supported adoption of additional tax policy measures, particularly in the area of natural resources, where taxation is low in comparison with peer countries. Passage of new legislation to broaden the tax base will also be important,” said the IMF in a statement October 25, 2011 after completing a two-week review of Ghana’s economy.
But Chief Executive Officer of the Ghana Chamber of Mines, Dr Toni Aubynn told ghanabusinessnews.com on telephone October 25, 2011 that additional taxes or introduction of new ones on the part of government should be done ‘scientifically’ since the soaring of gold prices does not necessarily mean mining companies are making more money.
Dr Aubynn explained that government must consider the cost of producing an ounce of gold which according to him some companies are producing an ounce of gold at a cost of $1,200.
“It must be done based on facts and scientifically. We should not think the high price of gold necessarily means companies are making more profits,” Dr Aubynn told ghanabusinessnews.com.
He said 1.3 per tonne ore turned into grates is insignificant in Ghana as compared to a country like Mali which has bigger grates.
“Government must also consider the cost of doing business in the country,” he said adding that the taxes should be in a way that will not drive away investors.
Dr Aubynn indicated that the chamber is not against the move since every Ghanaian must benefit from the sector.
He noted that the mining industry contributed about 23% of the country’s internally generated revenues in 2010.
By Ekow Quandzie
well thats a bold statement however in saying that will the ghanaian people benefit .Will they also know where will all this new tax revenue be targeted for speifically.Workers are under paid and over taxed cost of living has sky rocketed ummm!!