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Mining Sector Needs Open Dialogue – Dr. Aubynn backposted on Thu, 28 Jun at 20:00
To prove this and engender transparency and dialogue in the sector, the Chamber commissioned PricewaterhouseCoopers to conduct a study on the total tax contributions by mining companies in Ghana.
The report, generated on the activities of nine companies revealed that mining companies are paying significantly more than is necessary and might be over – burdened. The mining companies were cited to be bearing an additional tax burden of 37.5% aside a Bank of Ghana Monetary Policy Report which said the industry contributed 9.6% of total government tax revenue in 2010. The report showed that for 2010 the total taxes borne by mining companies amounted to $301m of which $121m consisted profit taxes and $113m of mining specific taxes such as royalties.
Defending the position that mining companies are already paying too much tax on Joynews' pm:EXPRESS, CEO of the Ghana Chamber of Mines, Dr. Toni Aubynn, said it is easy to pinpoint gold price as opposed to how much it cost to produce it. Unfortunately people equate the rising gold price on the international market to profit margins which is not the same.
Mr. Aubynn says this is not fair because “it might be the case that all commodity prices could be going up, all input prices are going up so the margins might not be as high. You need to look at the cost of doing business and then the margins.” He noted that “royalties are based on gross fields where you sell your gold at the spot price, and taxes are put on before deducting your cost so once the prices are high, government naturally gets the benefits”.
But a Programmes Officer with the Third World Network, Alhassan Atta – Quayson challenged the argument from the Chamber. Citing a GNA article that quoted the Ghana Chamber of Mines extensively, he said the cost of producing an ounce of gold in 2010 was 684 dollars. “In that same year, the average price the mining companies realized per an ounce of gold was 1,219 dollars – fairly 50% in terms of production cost. We need to note that this production cost that we are talking about includes all these taxes that they have identified. The remainder which is about 40% is what the mining companies are taking”.
Consequently, Atta – Quayson said that the mining companies are simply not paying enough particularly as they are operating on generous incentives; do not pay import duties, make a number of deductions that bring the actual corporate tax payable lower than it should be.
He argues that with the exception of royalties, all other corporate entities are paying exactly what the mining companies are paying by way of tax including withholding tax, corporate taxes, payee contributions, VAT. “Given the value and the wealth that they are creating from our mineral resources, they should pay more than what they are paying at the moment”.
In the 2012 Budget Statement and Economic Policy presented to Parliament by the Minister of Finance and Economic Planning Dr. Kwabena Duffour, government made sweeping changes to taxation as part of its key revenue mobilization drive by increasing corporate tax rate from 25% to 35%; and installed a windfall tax of 10%. The mining companies have indicated that could discourage further investments though industry players say the increases could earn government as much as GH¢314 million a year.
It is not clear if these changes have taken effect yet though Parliament is said to have passed the laws on it last month.
A tax lawyer also on the programme, Abdallah Ali Nakyea, throwing more light on the taxation drive said tax is a creature of statute and if Ghana feels it is not gaining enough, it just has to review the laws because increases will not be gotten from interpretation. He advised that in seeking revenue from mining companies, government must not lose sight of how to manage that revenue, citing the deplorable nature of mining committees as example of the mismanagement in mining taxes from government.
“Ghana started with incentive to attract investments into the various sectors of the economy and can review the laws going forward”.
For now, it is difficult to track mining revenue as it goes into the consolidated fund. However, Atta – Quayson took a swipe at Parliament for being lax on mining laws in the country.