Parliament backtracks on own recommendations, Grants US$6.5m tax exemption to COCOBOD

Emmanuel Bruce Business News Jul - 31 - 2018 , 11:24

After recommending to Parliament last year that the 2017/2018 season should be the last time the Ghana Cocoa Board (COCOBOD) is exempted from the payment of tax stamp duty, the Finance Committee has backtracked on its stance.

Rather, it has recommended to the House to once again grant COCOBOD a tax exemption of US$6.5 million on its US$1.3 billion syndicated loan.

Section 32 (6) of the Stamp Duty Act, 2015 (Act 689) requires that loan documents should be stamped at 0.5 per cent of the loan amount, however, COCOBOD has over the years been exempted from paying this stamp duty in order to ensure that the trade finance facility was used solely for the purchase of cocoa beans and related expenses.

This position was expected to change this year because the finance committee in its report on the syndicated loan last year recommended that COCOBOD be made to pay for the Stamp Duty starting from this year, a recommendation which was adopted by the house and even supported by Deputy Minister of Finance, Mr Kwaku Kwarteng.

The Chairman of the Finance Committee, Dr Mark Assibey Yeboah around that time told the Graphic Business in an interview that there was no justification for COCOBOD to continue enjoying the tax exemption going forward.

“They are going for a loan of US$1.3 billion and the small money that will come to the central government too through the stamp duty too, they want exemption,” he noted.

“The tax exemption for this year, for instance, is just over US$ 6 million, which if it had been taken by the government would not have seriously affected COCOBOD in anyway,” he added.

However, in a quick turn-around, the finance committee has recommended to the house to allow COCOBOD enjoy the tax exemption for this year as well.

In its report, the committee explained that COCOBOD was currently financially distressed due to declining World market prices; therefore paying the stamp duty would add further financial challenges to the board.

Utilization of 2017/18 facility

The Chief Executive Officer of COCOBOD, Mr Joseph Boahen Aidoo informed the committee that the syndicated loan for the 2017/2018 was drawn down in three tranches.

He said the first 50 per cent drawdown was made on October 6, 2017, with additional US$450 million drawdown made on November 13, 2017.

The last drawdown was made on December 13, bringing the cumulative drawdown to a full amount of US$1.25 billion (GH¢5.49 billion).

The CEO said GH¢1.93 billion was used as seed funding to license buying companies (LBC) for cocoa purchases, GH¢2.81 billion used for cocoa taken over receipts (CTOR) and cocoa deliveries to LBCs, GH¢395.79 million used for inputs, CODAPEC and Hi-tech expenses, and GH¢382.79 million was used for operational expenses.

Utilization of 2018/19 facility

Mr Boahen pointed out that, for the 2018/2019 season, the facility amounting to US$1.3 billion would be used for cocoa purchases and payment for other liabilities.

Domestic borrowing

He also informed the committee that in the 2017/2018 season, the board needed to borrow GH¢2.7 million to support its finances.

He said the borrowing became necessary as a result of the decline in the world prices of cocoa as well as existing legacy debts.

Provision for stabilisation fund

The technical team of COCOBOD informed the committee that the stabilisation fund was part of the positive margin between international prices and producer prices.
Currently, the producer prices are higher than the international prices, hence the margin is adverse.

The technical team indicated that if the situation improved, payments would be made into the stabilisation fund. — GB