Mining firms invest $10b into Ghana’s economy but 2012 tax hike to lower investments – Chamber of Mines

The Ghana Chamber of Mines says government’s proposal to increase taxes in the mining sector in the 2012 fiscal year will lead to low investments in the sector.

Finance and Economic Planning Minister Dr. Kwabena Duffuor who on November 16, 2011 presented government’s 2012 budget told Parliament that “Beginning in the fiscal year 2012…following established practice in the extractive industry, and in the oil and gas sector, the corporate tax rate for mining companies will be increased from the current 25% to 35%.”

According to the text of the budget, a windfall profit tax of 10% will be collected from all mining companies and “a uniform regime for capital allowance of 20% for five years for mining, as is the case in the oil and gas sector.”

Government explained that environmental degradation resulting from mining operations also imposes additional costs on the country.

Late October this year, an International Monetary Fund (IMF) team led by Christina Daseking on a visit to Ghana made recommendations to government to implore ways of generating more revenues from the mining sector as prices of gold keep rising on the world market.

According to the Chamber however, Ghana’s economy has received an investment of $10 billion between 2000 and 2010 from the sector. It adds that the mining industry contributed about 23% of the country’s internally generated revenues in 2010.

The sector was also leader of foreign direct investments (FDIs) into the country since 1998 to 2008, observed the Chamber – the umbrella body for all mining firms including giants like AngloGold Ashanti, Newmont, Goldfields among others.

But these investments are likely to decline according to the Chief Executive Officer of the Chamber, Dr Toni Aubynn.

In an exclusive interview November 17, 2011, he tells ghanabusinessnews.com on telephone that the tax increase is “not comfortable to the chamber” since it would lead to cost of production.

Dr Aubynn said it will also lead to low investments in the sector adding that companies’ corporate social responsibility (CSR) will be affected – “it will be affected below budget”.

“It will not encourage investments…lead to cost of production. These are business entities and they operate on demand and supply,” Dr Aubynn said.

According to the body, some mining companies are producing an ounce of gold at a cost of $1,200.

As a Chamber, he noted, they will engage government whether there can be a decrease of the proposed tax increment even though it has already been stated in the budget. “We must do a critical analysis of the situation,” he added.

Dr Aubynn however, indicated that the Chamber is not against the move since every Ghanaian must benefit from the sector.

By Ekow Quandzie