Stop giving out tax waivers to mining companies – Experts

Adnan Adams Mohammed

Extractive industry experts have expressed worry about the level of tax waivers and trade-offs, including reduction in mineral royalties, given to mining companies in the country.

They observe that, it has been a trend of all governments for giving out huge waivers to mining companies causing the country to lose revenue from the mining sector.

At a recent engagement, with Executive Director of Centre for Extractives and Development Africa (CEDA) Emmanuel Kuyole he expressed deep dissatisfaction with the fiscal aspect of mining concessions successive governments have signed with mining companies over the past decades.

“I am not very pleased with how we quickly reduce the royalty rate which we all know is one of the key [and] surest areas where the country gets revenue from the mining companies,” he stated

As a vindication to his worry,  Parliament last week approved a US$259 million  tax waiver for AngloGold Ashanti in a concession agreement signed with  Ghana. The excuse is that, the negotiators have a mind of making the company more profitable and able to create more jobs for the next seven years

But Mr. Kuyole objected saying that, government has technically given out lots of revenues in the sector, which have not been put out in the public domain, indicating government has reduced royalty rate from 5 to 3 percent.

“Beyond that, we are also cutting down corporate tax which is supposed to be 35% to 32%. These are all sources of revenue loss,” he stated.

At a workshop organized by the Institute of Financial and Economic Journalists (IFEJ) in partnership with GIZ, he said,  the government sometimes goes to the extent of exempting mining companies operating in the country from paying local assembly taxes, something he observed, that is depriving the state of the necessary revenue from the sector.

The mining sector has been a major contributor to the growth and development of Ghana, contributing 1.35 billion cedis and 1.65 billion cedis to the country’s revenue in 2015 and 2016 respectively.

In 2015, the total contribution of the sector accounted for 16 per cent of domestic revenue by Ghana Revenue Authority.

Figures from the Bank of Ghana also show the minerals sector accounts for 45.5 per cent of gross merchandise exports making it the leading foreign exchange earner.

Despite these contributions, the mining sector holds much more great potentials for domestic revenue generation.

Mr. Kuyole wondered why Ghana keeps cutting down on corporate taxes for mining companies, saying “If there is the need to make reforms in the tax, why then do we cut down corporate taxes?”

He has thus underscored the need to build capacity of agencies in the sector in order for them to negotiate mining contracts well by putting the interest of the country first.

“Going forward, we need enough capacity to be able to negotiate and put the country’s interest first so that we wouldn’t act quickly when it comes to giving out mining concessions.

“What is important is that government has to enhance state agencies that lead negotiations and eschew partisan politics from all negotiations as well. We need professional negotiation jobs and make sure that we stop the practice of giving out tax concessions to the mining companies,” Mr. Kuyole advised.