Ghana\'s new tax regime ruffles mining firms

Mining firms operating in Ghana have expressed concerns about a new mining tax regime introduced by the government, which they claim might drive them out of business. In its 2012 budget, the government introduced a 10 percent Windfall Tax, and increased the corporate tax for mining firms from 25 percent to 35 percent in addition to the changing of royalties from a sliding three to six percent to a fixed five percent in 2010. Managing Director of Liebher Mining Ghana Limited Dale Clayton believes the new tax regime will drive investors away from Ghana' s mining sector. "Ghana has huge prospects in mining but it is making some mistakes that Australia made in the past and suffered for it. Tax uncertainty can cause the laying off of staff as happened in Australia," Clayton asserted. A director at the Ghana Chamber of Mines, Sulemanu Koney, supported the position of the mining firms on the new tax regime. He said tax uncertainty could force firms to leave the country, and called for a stability arrangement between government and the miners. But a member of the steering Committee of Ghana Extractive Industries Transparency Initiative (GHEITI), Steve Manteaw, believes the mining firms are only creating unnecessary fear and panic over the new tax regime. He explained that "the re-introduction of the windfall tax is meant to tax only the extra income made by the mining firms beyond their estimated income. The tax is not an extra tax, but tax on extra profit so if you do not make extra profit, you are not obliged to pay." Manteaw advised the mining companies to rather negotiate on the threshold of the extra income calculation to determine the level at which a mining firm was considered to have made extra profit, above which the windfall tax would be charged. In Ghana, royalties on mining have been between three and six percent, with the mining companies paying the lowest figure since 2004 at a time an ounce of gold was selling for 400 U.S dollars on the world market. Government has since 2010 proposed to charge a fixed royalty of five percent but the mining firms are accusing the government of bad faith. "The introduction of the windfall tax means government is becoming wiser; but companies are always known to be averse to payment of tax. Even for Ground Rent which is 0.5 Ghana cedis per acre, these companies would rather hire lawyers for thousands of dollars to fight for them not to pay these meager fees," said Manteaw. He also argued that it was not true that the introduction of the windfall tax would cause mining firms to leave Ghana because gold is a scarce commodity with only five African countries having the resource. Manteaw argued that it was still better for mining firms to mine gold in Ghana than in a place like Mali, where mining was carried out in the desert with 100 percent thermal power, and without port facilities and required manpower resource.Ghana has a mix of electricity from hydro, thermal and others, with port facilities and very highly capable human resources that are even imported by Mali. "Arguments that the mining companies will leave Ghana because of the windfall tax are too simplistic," he added. Manteaw advised the government to ignore the complaints by the companies and let them carry out their threat to leave Ghana if they so wished. "Once government learns to shift from the dependence on mining revenue, they can afford to allow the minerals to remain in the ground because it is not a perishable product," Manteaw stated. "Mining has serious environmental consequences and so government must not pander to the whims of the mining firms," he cautioned. IMF's Ghana country assessment team led by Christina Daseking, which visited Ghana last year, advised the government to raise more revenue from the mining sector as was done in other parts of the world.