Ghana government urged to ignore mining companies’ complaints over new tax hikes

The National Coalition on Mining (NCOM), has urged the Government of Ghana to ignore complaints from mining companies operating in Ghana, following the new fiscal regime introduced into the sector.

In a statement issued on the 2012 budget read by Finance Minister, Dr. Kwabena Duffuor last week, the Coalition, a grouping of communities affected by mining, NGOs and individuals engaged in mining sector advocacy, called on the government to ignore complaints from mining companies about the new initiatives, and rather proceed with the immediate implementation of the new taxes and the critical review of the fiscal regime and mining agreements.

“The upward adjustment and an overhaul of the fiscal regime constitute a set of actions that ensure that the country improves upon its share of benefits from mining sector,” they opined.

NCOM further charged that Ghana and Africa as a whole cannot continue forever with investment relations in which: mining production remains an enclave with no linkages and local value-addition, private mining companies pay land rent of GH¢0.50 per km2 per annum, stability agreements lock government royalty receipts to only 3%, the environmental and social cost of mining is externalised to the public and communities, and human rights violations, especially of communities in mining areas occur with impunity.

Praising government for the step it has taken in the mining sector, the Coalition said the steps are part of a set of actions that are urgently needed to improve the contribution of the sector to the economy and people of Ghana.

In the 2012 Budget Statement and Economic Policy presented to Parliament by the Minister of Finance and Economic Planning, Dr. Kwabena Duffuor on Wednesday November 16th, 2011, government sought to increase corporate tax rate from 25 per cent to 35 per cent; impose a windfall profit tax of 10 per cent, and implement a uniform regime for capital allowance of 20 per cent for five years for mining companies.

The budget also noted the government’s intention to review the principle of ring-fencing as applicable to the Natural Resources Sector in 2012, to prevent companies undertaking a series of projects from deducting costs from new projects against profitable ventures yielding taxable income.

In the view of the Coalition, the complaints from the mining company “are simply a smokescreen to cover the super profits the industry has enjoyed under the long years of liberalised mining regimes in Ghana and Africa as a whole,” and “a subtle threat to any further reforms to increase or introduce additional taxes to raise revenue and improve the developmental impact of mining in Ghana.”

The Coalition argued that the Africa wide liberalisation of mining codes since the 1980s that triggered a boom in large scale foreign direct investment (FDI) in Africa’s mining sectors is long gone.

“The boom in FDI was an immediate result of generous incentives offered by the liberalised mining regimes sponsored by the World Bank Group and other bilateral donors. These regimes were primarily designed to attract FDI and the key instruments used included the provision of large percentage (up to 80%) of capital allowances, exemption of custom and excise duties on mining equipment, guaranteed offshore retention of earnings, carry forward of losses for a period not less than five years, removal of windfall taxes, and rights of discretion among others,” they said.

Stating that today, such incentives only serve the interest of mining companies, NCOM stressed that the high price of gold has even triggered calls on the government of Ghana from traditional architects of the liberalised mining regimes – the World Bank and the IMF to raise certain taxes in order to generate more benefits from the mineral wealth of the country.

Further advancing their argument for government to go ahead with fiscal reforms in the mining sector, the Coalition said although there were few transnational mining companies operating in Ghana before the reforms in the 1980s,  Ghana had registered more than two hundred (200) mining companies holding various exploration and production concessions as at the beginning of 2009.

“The number of transnational mining companies operating in the mining sector requires a shift of state policy from simply attracting FDI to optimising the benefits of FDI to the national economy,” they underscored.

Listing other African countries where tax regimes have been changed, NCOM said “When the world price of copper increased by nearly 400% between 2000 and 2007 the government of Zambia increased taxes in order to raise its share of mining revenue in the face of similar hostility and threat from the mining companies.

“The Republic of Guinea recently passed a new mining code in which taxes and state equity were raised to optimise government revenue. In Tanzania and the Democratic Republic of Congo the surge in mineral prices have sharpened and widened public debates about the costs and benefits of mining.

“At the African Union level as well as ECOWAS and SADC, governments and inter-governmental agencies like the United Nations Economic Commission for Africa have lined up alongside civil society organisations (CSOs) in seeking a revision of existing mining contracts as well as of the codes under which they were granted.”

By Edmund Smith-Asante

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