Mahama pledges to focus on getting enough oil, mining revenue for Ghana
Ghana’s President-elect, John Dramani Mahama, has indicated that during his four-year tenure, he will focus on how to use revenues from natural resources to develop the country.
He therefore says, he will press international firms in the energy and mining sectors for more revenue.
He told Reuters in an interview published December 12, 2012 that Ghana would seek to convince companies to agree to changes to boost the state’s take from taxes and royalties but will respect existing contracts between the country and the companies.
“There is a lot of work to do in the next four years to consolidate Ghana’s transition into a middle-income country, and that’s where I will focus,” President Mahama told the newswire adding that “We’re partners in this and we abide by all international agreements we’ve signed.”
Mr Mahama was declared President-elect by the Electoral Commission on December 9, 2012 after winning the 2012 presidential polls by 50.07%.
The issue of getting more revenue from the oil and mining sectors is something the NDC government has been pursuing since it came to power in 2008.
In November 2011, Ghana’s Finance Minister Dr. Kwabena Duffour, who presented the 2012 budget in Accra (November 16, 2011) told lawmakers that government from 2012 fiscal year will increase the corporate tax rate for mining firms to 35% from the current 25%.
“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%,” Dr Duffuor said.
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.”
The move to increase the taxes as stated in the 2012 budget is yet to materialized as government and stakeholders have formed a committee on the matter.
The International Monetary Fund (IMF) has stated that Ghana needs to increase its tax regime on natural resources.
In October 2011, an 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 kept rising on the world market.
According to the IMF, Ghana which is Africa’s second biggest gold producer behind South Africa, is receiving low revenues compared to other countries that also produce the metals.
“On the revenue side, the mission encouraged the government to continue efforts to strengthen tax administration. It also supported adoption of additional tax policy measures, particularly in the area of natural resources, where taxation is low in comparison with peer countries. Passage of new legislation to broaden the tax base will also be important,” said the IMF in a statement October 25, 2011 after completing a two-week review of Ghana’s economy.
But Chief Executive Officer of the Ghana Chamber of Mines, Dr Toni Aubynn told ghanabusinessnews.com on telephone October 25, 2011 that additional taxes or introduction of new ones on the part of government should be done ‘scientifically’ since the soaring of gold prices does not necessarily mean mining companies are making more money.
Dr Aubynn explained that government must consider the cost of producing an ounce of gold which according to him some companies are producing an ounce of gold at a cost of $1,200.
“It must be done based on facts and scientifically. We should not think the high price of gold necessarily means companies are making more profits,” Dr Aubynn told ghanabusinessnews.com.
He said 1.3 per tonne ore turned into grates is insignificant in Ghana as compared to a country like Mali which has bigger grates.
“Government must also consider the cost of doing business in the country,” he said adding that the taxes should be in a way that will not drive away investors.
Dr Aubynn indicated that the chamber is not against the move since every Ghanaian must benefit from the sector.
He noted that the mining industry contributed about 23% of the country’s internally generated revenues in 2010.
Many believe that the proposed tax hikes at the time would be an anti-investment move, a claim Deputy Finance Minister Mr Seth Terpker disagrees.
At a post 2012 budget seminar organised by PricewaterhouseCoopers in November 2011, Deputy Finance Minister Seth Terkper indicated to stakeholders not to see the proposed tax hikes as an anti-investment drive by government.
Mr Terkper said the move was in line with the government’s efforts to rationalise tax, adding that discussions would be held with sector players on the implementation of the proposals, the Ghana News Agency reported.
By Ekow Quandzie