Report on mining’s contribution to economy out

Local mining companies’ contribution to public finance constituted 7.2 percent of their total turnover paid to government, the 2009 Global Mining Report has disclosed.

Available data indicate that the mining companies’ combined turnover recorded an excess of US$600 million as at the end of 2003.

The second edition of the PricewaterhouseCoopers’ (PWC) 2009 Global Mining Report on ‘Total Tax Contribution’ (TTC), revealed that the country’s mining sector taxes, royalties and other contributions amounted to 56 percent - with property and corporate tax income recording 26 percent - of the country’s total tax payment.

The study, which justified mining companies’ long-asserted claims of significant economic contributions to the public finances slated for national development, also disclosed that the average wage and salaries per employee in the country’s mining sector recorded US$11,733 - with employment taxes per employee registering US$3,049.

“One company made a large contribution to the government and public finances in 2008 totalling approximately US$9 million. Of this, less than one percent is corporate tax, with other taxes and contributions making up more than 99 percent of the total,” the report stated.

The study, which aims to bring greater transparency to the full contribution that mining companies make to public finances, covered the income taxes paid by mining companies and analysed their total payments to governments for the year ended 2008.

It also intends to pressure both government and business to increase transparency in the extractive industries with a call for companies to publish how much they pay, and for governments to publish what they receive and how they use such revenues.

The result will provide new information about the economic footprint of mining companies and how they contribute to public finances and the communities where they operate.

The study involved 22 mining companies operating in some 20 different countries - with seven companies from Ghana – and covered a turbulent period, with the financial crisis unwinding and the start of the global economic recession. The impact of the downturn on the sector is reflected in the result - the total tax rate increasing.

Mr. George Kwatia, Tax Partner, PricewaterhouseCoopers Ghana, presenting the findings of the study in Accra explained that the contribution of the mining sector is usually not recognised.

He revealed that the 22 mining companies that took part in the survey had a large number of employees and made an important contribution in employment taxes. The companies reported a total of 302,880 employees in the countries for which they provided data, and a total of US$1.7billion in employment taxes borne and collected.

On average, for each one of their employees, these mining companies paid an amount of US$15,349 to government in employment taxes alone, split between US$5,290 taxes borne and US$10,059 taxes collected.

“Employment taxes per employee are an indication of the direct benefit brought to public finances for each job created or maintained by these companies.”

Corporate income tax formed 40 percent of all taxes and contributions in addition to other non-income taxes comprising royalties, Value Added Tax (VAT) and infrastructure funding.

It was also confirmed that mining companies contribute substantially to public finances, as an amount equivalent to 15.3 percent out of their total turnover was given to governments.

Ghana is endowed with minerals such as gold, diamond, manganese and bauxite as well as other industrial minerals like salt, limestone and kaolin that are exploited on a small-scale in the country.

Chief Executive Officer, Ghana Chamber of Mines, Dr. Joyce Aryee, explained that the release of the report, which is timely, vindicates the mining sector’s huge economic contribution to government and the national development.

“Most people believe that extractive companies - which are mostly trans-nationals - are interested in extracting the non-renewable resources, repatriating huge profits and leaving the host country dry. The perception is that these extractive companies milk their host countries dry.”

Dr. Aryee mentioned that mining companies have over the years consistently maintained the position as the highest gross foreign exchange earner as well as providing jobs in the country.

Mineral royalties increased from GH¢1.9 million in 1990 to approximately GH¢90 million in 2009.

Data from the Minerals Commission indicate that Foreign Direct Investment (FDI) in the mining sector increased from US$6 million in 1983 to US$427 million in 2007.
The mining industry in 2009 also paid an amount of GH¢125 million as corporate tax while GH¢1.7 billion was collected by the Internal Revenue Service (IRS) from the sector.

Mineral revenue for the first quarter of 2010 stood at US$809.89 million - up from US$640.15 million for the same period in 2009.

“Government need to increase the quantum of mineral royalties that go to the mining communities - and it should be earmarked for specific developmental projects in the mining communities,” Dr. Aryee stressed.