THE Ghana Chamber of Mines (GCM) has signaled to the government to consider relaxing the totalled 20 per cent taxes imposed on companies within the country’s mining sector or risk shrinking growth and job creation within that sector of the economy.
The chamber is of the view that the said taxes will tighten internal investments within the companies and the sector as a whole, suck deep into their margins and in effect limit them from expanding to spur growth and job creation in the coming years.
The government, through its 2012 Budget and Economic Policy Statement increased corporate taxes for mining companies by 10 per cent, introduced a windfall profit tax of 10 per cent but gave a 20 per cent rebate on all capital allowances spanning five years.
Such taxes, according to the Finance and Economic Planning Minister, Dr Kwabena Duffuor, who read the budget last Wednesday, were premised on the fact that “the economic and social benefits that the sector provides (to Ghana) do not meet our expectations.”
The imposition of the taxes on the mining sector which formed part of the government’s wider aim of mobilising revenues to support infrastructural development and job creation trailed an earlier recommendation by the IMF team that the government considered innovative ways of raising more revenues from the country’s mining sector.
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| Dr Toni Aubynn, CEO, GCM |
The Chief Executive Officer of the chamber, Dr Toni Aubynn, however, told the GRAPHIC BUSINESS in an interview that the present resorting to increasing corporate taxes and imposing a windfall profit tax on the companies will rather discourage growth in the sector.
“Imposing a 10 corporate tax on the industry and another 10 per cent of windfall profit will very likely have a rather uncomfortable impact on the industry.
“The jump from 25 per cent of corporate taxes to 35 per cent is huge and you can imagine the impact on the companies, the industry and the economy in general,” Dr Aubynn said adding that the result could possibility be a shrink in companies’ investments, growth and consequently job creation.
“The 2012 Budget’s objective is to create employment by spurring growth and so you would think that the government will want to be careful not to kill the hen that lays the golden egg. But once you impose 20 per cent of taxes on the sector at a go, then you indirectly tire the hands of the companies from expanding to create the jobs you want,” he said.
He has meanwhile indicated that the chamber was “not against government maximising revenues from its extractive industry but you also don’t have to do it such that the companies suffer at your expenses.”
On the 10 per cent windfall profit tax, Dr Aubynn said “the chamber is not even sure of how it will be calculated; what is a windfall profit and who determines that,” he asked noting that although windfall profits are normally determined by global prices vi-a-vis the price targets set by the company on the product concerned, “rising mineral prices in the global mineral market mean rising cost for mining companies and that impacts negatively on the revenues generated.”
The GCM CEO said his outfit would have wished to be part of the discussions that led to the fixing of the taxes, particulary the windfall profit tax.
He was thus hopeful that the government, through the MoFEP, will reconsider its decision on the taxes by meeting the chamber in the coming days “to atleast clarify issues on the taxes especially the calculations of the 10 per cent windfall profit tax.”
Dr Aubynn also wondered why Dr Duffuor intimated during the presentation of the budget to Parliament that there was lack of transparency in the country’s mining sector after the chamber was instrumental in getting Ghana to sign onto the Extractive Industries Transparency Initiative (EITI), a programme aimed at opening up extractive industries to public scrutiny.
“And if the government even has an issue with any company regarding transparency, cann’t they order such a company toopen up its books for checks by the government? So why this issue of lack of transparency,” he asked.
On the whole, Dr Aubynn said the country needed to change its mindset towards mining “as a sector that does not contribute to economic development.”
According to him, although Ghana has mined minerals for a long time, the country was yet “to understand how to use mining to develop the economy.
“It is not mining companies that will develop our economy for us,” he said noting that Ghana has over the years “thought that mining companies in the country should contribute to economic development through higher taxes. But that should not be the case.”GB
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