Mining companies aren’t overtaxed -- Hammah

While mining companies complain of the new tax hikes, government officials and civil society actors say the Ghanaian situation is nothing out of the ordinary and that the taxes are in keeping with industry standards. Minister of Lands and Natural Resource Mike Hammah said in an interview with B&FT that government looked at what pertains in the industry and arrived at the taxes. He said he is also surprised that the companies are claiming they were not consulted on the taxes: “It is important to state that there is no point in the companies saying that government did not consult them. We could not have done that without consulting them. We consulted them and they appreciated government’s position.” Dr. Edward Larbi-Siaw, a Tax Policy Advisor at the Ministry of Finance, also told B&FT that international consultants were brought in to look at the more controversial windfall tax and that the companies were consulted. “I don’t think government is coming out to overtax the companies,” he said. When the corporate tax was at 25%, he said, the price of gold was around US$600 per ounce, and he said it is only fair that the companies pay more now the price has gone up to about US$1,500. He said there is no need for the companies to get worked-up over the windfall tax of 10% since they will not pay if they do not make extra profits. Dr. Steve Manteaw, Campaign Coordinator of the Integrated Social Development Centre (ISODEC), also observed that the gold price was very low in the 1970s and 80s when the country entered into contracts with some of the companies, and so the tax rates were lowered for them. Now that the price of gold has gone up, the country needs to benefit more, he reasoned. “I think government is doing the right thing for Ghana. It is precisely because of the skewed nature of the fiscal terms that Ghana has not been able to derive adequate benefits from its mineral resources.” He said a wrong impression has been created that the companies will fold up and leave as a result of the taxes. “We are not going to lose investment; we are not going to lose jobs. Gold is not found everywhere...” The adequacy of revenue obtained by government from mining has been a subject of controversy. This sentiment has become particularly pronounced since the current mineral commodity boom. Gold prices are up about eight percent since mid-August at around US$1,730 an ounce. In the 2012 budget statement, the Minister of Finance, Dr. Kwabena Duffuor observed: “Although mining is one of the leading sectors in the country, accounting for about 23.5 percent of direct taxes in 2010, the economic and social benefits that the sector provides are not commensurate with our expectations.” In that budget, the corporate tax rate for mining companies was increased from 25% to 35% and a windfall profit tax of 10% was also announced. Additionally, a uniform regime for capital allowance of 20 percent for five years was introduced. These actions were in addition to a previous review of the industry royalty rate from a sliding 3-6 percent to a fixed rate of 5 percent. According to Dr. Larbi-Siaw, parliament has given approval for the implementation of the taxes except the windfall tax, the proposal for which is still before MPs. But mining companies in Ghana argue that the hike in gold prices does not automatically translate into higher profits for them. Dr. Tony Aubynn of the Ghana Chamber of Mines has, since the announcement of the new taxes, been expressing disquiet about the implications for the industry. Speaking at the presentation of the second-quarter report of Gold Fields Ghana Limited recently, Dr. Aubynn called on government to re-examine the taxes. “The cost of feasibility study, ground rent, uncertainty of resources, tax revenue and royalties all take a chunk of the profits derived. Therefore, when the government imposes so many taxes it cripples the companies and drives them out,” he said. Source:B&FT