Mining industry wants Windfall Tax reviewed

BY: Enoch Darfah Frimpong

The 2013 Budget and Economic Policy Statement  of the government reiterated its decision to introduce a 10 per cent  Windfall Profit Tax after due consultation with stakeholders.

This, however, is not going down well with the industry players who think the industry has undergone a rigorous fiscal regime change and as such is already bogged with several high tax measures.

According to Mr Sulemanu Koney of the Ghana Chamber of Mines, “the industry is of the opinion that with the cumulative effect of recent changes in the mining industry’s fiscal regime, it will be defeatist for government to introduce a Windfall Profit Tax.”

He said already the LI 2191 Fees and Charges (Amendment) Instrument, reviewed the ground rent for Mining Concessions from GH¢0.5/Km2 to GH¢36.5/acre- equivalent to about GH¢9000/Km2, something which he said the chamber had subsequently registered its displeasure because the rate was revised without consulting stakeholders in the industry.

He was speaking at a mining workshop organised by the Journalists for Business Advocacy (JBA), a group of business journalists drawn from various media outlets to deliberate on reporting effectively on the extractive industry in Ghana.

Mr Koney also explained that operators in the industry pay mineral royalty, which was revised from a range of three to six per cent to a flat rate of five per cent in 2011; of which 2.25 per cent goes to the Stools also derived from the same land for which ground rent is paid.

The industry’s corporate tax was also increased from 25 per cent to 35 per cent in 2012, while  capital allowances was varied from 80 per cent in the first year and 50 per cent on declining balance to a flat rate of 2 per cent over 5 years.

He also explained that there were inordinate delays in refunding surplus Value Added Tax (VAT) to operators in the industry which tend to lock up their working capital.

He was thus of the opinion that there was the need for the government to consult widely especially mining companies prior to changes in fiscal regime so as to avoid surprises and make sure changes are justifiable and implementable.

“Government should adopt a Life Cycle and Integrated Approach to mining taxation, consider more prudent utilisation of mining revenues to ensure sustainability and future generation issues,” he said.

Speaking on the economic and social impacts of mining in Ghana, Mr Jerry Ahadzie, an officer of the Minerals Commission said it was imperative to improve local content in the industry.

“The drive for augmenting local content is not just an African or developing country phenomenon. In Ghana, efforts at improving local content  that is, Human Resource and Goods & Services included Government developing and expanding training institutions,” he said.

He also said government and the industry have identified 28 products required by industry together with the supplier managers of the Chamber of Mines as well as identified some local companies with the capacity to provide some services to mining companies.

“Some major mines started patronising products and services and with IFC Support, initiatives to build additional local enterprise capacity is underway,” he said.

With respect to value addition, he said increase in gold refinery capacity/scale was being considered by some investors as well as governments policy to use the bauxite and iron ore resources to catalyse industrialisation.

According to him, small-scale mining (SSM) is a significant sector that provides livelihood for millions of people around the world.

Mr Ahadzie, therefore, reiterated the need to develop an all-inclusive framework to ensure mining catalyzes development through the corollary linkages rather than leakages which, he said, could be achieved through stakeholder commitment and participation.

“Therefore, stakeholder responsibilities must be clearly identified and mainstreamed in sector policies, programmes and activities for implementation,” he said.

He said for small-scale mining, whilst there is no single solution to the challenges, deepening stakeholder engagement is key to developing strategies to address them.

“For example, mining and exploration companies could offer to explore some of the blocked out areas for SSM as part of their CSR in mining communities,” he explained.

Mr Ahadzie also stressed that significant investment over the years and consequently mineral outputs led to an increased sector contribution to the economy of “27 per cent of government revenue as collected by the Ghana Revenue Authority in 2012.”

“Average 38 per cent of total merchandise export earnings over last 10 years while the industry also employed 28,000 for large scale and estimated over one million people for small-scale mining,” he said.

The General Secretary of JBA, Mr Suleiman Mustapha called for a fair, balanced and objective reportage of the extractive industry especially mining. GB

Story: Jessica Acheampong