Mining companies not happy with high taxes

Business News of Thursday, 18 April 2013

Source: Graphic Business


Mining companies have complained of high taxes on their operations, which they say disrupts investment in the industry. Director of Analysis, Research and Finance at the Chamber of Mines, Mr Sulemanu Koney has said the chamber was weighing its options with regard to the proposed 10 per cent windfall tax and would soon make its voice known.

Speaking at a training workshop for journalists and editors on ”reporting on extractives” organised by the Journalists for Business Advocacy, Mr Koney said Ghana was one of two countries in Africa, which imposed huge and numerous taxes on the mining industry. “Ghana’s effective tax rate that is the aggregate of all mining taxes, stands at 47 per cent,” he said, adding that, the figure was more than 13 per cent higher, compared with taxes in Burkina Faso.

Mr Koney said government last year increased corporate tax from 25 to 35 per cent while the office of the Administrator of Stool Land also shot its ground rent by over 1.8 million per cent from GH¢0.5 per kilometre to GH¢36.5.

“The Chamber is unhappy with the unilateral decision by the Stool Land to revise the rate without consultation with the mining industry,” he said. On gold prices and cost of mining, Mr Koney said the cost of operations was very huge and this equally affects their revenue taking into consideration the cost of certain inputs such as electricity, fuel and payment of salaries and taxes. For instance, he said, the mining industry last year spent over US$3.2 billion, representing 73 per cent of the US$4.6 gold revenues generated on logistics, electricity, fuel, taxes, payment of salaries, adding that, fuel purchases alone cost the mining companies over one million dollars last year.

“Mine lives are planned alongside predictable fiscal regimes to ensure profitability and sustainability. Excessive taxation on mining could be disruptive and kill the hen that lays the golden eggs” Koney stated. “Mining must be seen properly in its potential as catalyst for development.

For a strategic industry as the mining sector it is best practice to consult the companies for their input before making changes to the fiscal regime under which they work.” Mr Jerry Ahadzi, a Principal Officer at the Minerals Commission said that, small-scale mining (SSM) is reserved for Ghanaians according to law.

He, however, lamented the inability of young geology, mining engineering, surveying, minerals processing graduates to form consortium to take advantage of the sector. Yet Ghanaians are worried that, the country is not making much from the sector. “If our graduates will form a consortium of companies then they can do the right thing in the small scale mining area because most of those engaged in small-scale mining now, are not well educated.

They go for the Chinese in terms of equipment and some form of technology. Our graduates can mine systematically and they will not degrade the environment and by so doing will be encouraging local content and all the proceeds will stay in the country,” he said. These graduates know the value of the resource and, therefore, will not be motivated to sell off the licences. After some years of operation, they can also grow into big mining companies.

“The small-scale is not so capital intensive. About GH¢ 10,000 can start a mining operation. Local mining companies pay about 10 per cent of what foreign companies pay in terms of licencing fees,” Mr Ahadzi said