Miners urge caution over windfall tax

The Ghana Chamber of Mines has warned against the influence of persons “who do not understand” the industry, as Government consults with stakeholders over the imposition of a 10 percent windfall profit tax on mining companies.

 

Government proposed the windfall tax among new revenue measures for the mining industry in the 2012 budget, but implementation was delayed as Parliament was unable to consider a bill put before it to give legal backing to the tax.  

Delivering his 2013 budget statement before Parliament last week, Finance and Economic Planning Minister Seth Terkper said Government will re-introduce the bill in the coming weeks after due consultations with stakeholders. 

Reacting to the latest development, Dr. Toni Aubynn, CEO of the Chamber of Mines, cautioned government to be careful with its decision to embark on stakeholder consultation on matters involving mining taxes, because there is likelihood of arriving at a decision that is inimical to the long-term sustainability of the industry if persons who do not understand it have their way.

“When you take such an issue through stakeholder consultations, it is good; but those who don’t understand it may take decisions that are inimical to the long-term sustainability of the industry,” he said.

“We are saying that it should be technically-considered because not everybody understands mining, [and] not everybody understands taxes. If you technically consider the issue, you look at the technical intricacies and listen to what the experts from both sides are saying before you come to a compromise.”

Balancing the concerns of the mining industry against huge public outcry against companies -- that in over a hundred years of mining Ghana has not benefitted much -- has not been an easy task for Government.

The corporate tax rate of the industry was increased last year from 25 percent to 35 percent, and a committee is presently reviewing all stability agreements and incentives in the mining sector; while civil society interest groups have also submitted recommendations on how to adequately tax the industry. 

Dr. Aubynn warned that the new tax measures need to be implemented “scientifically”, because high gold prices do not necessarily mean mining companies are making more money.

He said some gold miners are currently producing at a cost of US$1,200 per ounce; adding, “at that rate, their gold mining costs appear to be far above the average for the continent”. Spot gold traded on Monday, March 11 at US$1,579 per ounce.

A windfall tax does not guarantee additional revenue, Dr. Aubynn said, and it has probably been deferred due to its complex nature. 

“Australia tried it, but they found out that it was going to be dangerous to sustainability of the mining industry -- so they reduced it to only two minerals, iron-ore and coal. Zambia also tried it, and realised that the long-term effect was going to be very dangerous to the industry; so they also dropped it,” he said.

“If you put all the taxes together, you are talking of about over 45 percent of our profits going into tax. This shows that the mining sector has critically contributed to and supported the country’s economy over the years.”