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General News of Sunday, 30 August 2020


Agyapa deal: Bright Simons deflates govt’s justification for choosing a tax haven

Bright Simons is Honourary Vice President of IMANI Africa and CEO of mPedigree Bright Simons is Honourary Vice President of IMANI Africa and CEO of mPedigree

Honourary Vice President of IMANI Africa, Bright Simons, has destroyed government’s justification for incorporating the controversy-ridden Agyapa Royalties deal in a tax haven.

Government, through the Finance Ministry, has justified choosing Bailieick of Jersey in the UK, a tax haven, to incorporate the Special Purpose Vehicle for the Minerals Income Investment Fund (MIIF) because it would ensure tax efficiency.

A Deputy Finance Minister, Charles Adu Boahen, said at a press conference last week Thursday that Ghana needed to register the company in a jurisdiction that will provide the ability for the royalties not to be taxed again.

“If we had decided to transfer the royalties in Agyapa that was domiciled in Ghana, we would have ended up in a situation where we would be paying tax twice,” he explained.

However, IMANI Africa, which is among 15 Civil Society Organisations (CSO) calling for the suspension of the deal over lack of transparency among other concerns, said the tax-efficiency justification may just be a ruse.

Speaking on the matter during a discussion on Joy News, Bright Simons said tax efficiency is not the only reason people list in tax havens.

“Tax efficiency is just one benefit. The other benefit is secrecy; the other benefit is reduced public scrutiny of certain types of transactions. The other benefit for which people list in tax havens is the ability to make share transfers that are less tax exposed, et cetera,” he said to emphasise the position of IMANI Africa and the other 14 CSOs that the details of the Agyapa deal are sinister.

Bright Simons, who is also CEO of mPedigree, said the other, more ominous reasons why people register their firms in tax havens (stated above) is the same reasons why CSOs are worried that a sovereign wealth fund like the MIIF, for its first major vehicle, will decide to choose a tax haven as its base.

“It is also the fact that given the way this bill has been structured, the fact that it is registered in a tax haven gives no further advantage,” he said.

According to IMANI Africa, rising gold prices and rising gold production in Ghana should lead to a higher valuation of the country’s royalties but the current Agyapa deal fails to ensure that.

The country's mineral resources, under the Agyapa deal, has been valued at $1 billion.

Bright Simons said because the government is choosing the stock market listing approach, Ghana’s mineral resources, chiefly gold, have been undervalued by more than 65%.

“This is because investors on the stock market have other instruments to tap into gold's positives,” IMANI Africa said.

IMANI, therefore, proposes that the deal be done through a beauty parade where the government invites several royalty streaming companies to bid directly.

“We have examined dozens of transactions in recent times and have concluded that Ghana shall make more through a beauty parade than through the stock market,” IMANI said.

IMANI Africa also faulted the legal terms of the transaction, noting that they are still skewed against Ghana.

Finally, IMANI Africa also strongly suggests that government should limit the total amount of royalties the country wants to sell upfront “in order not to simply defer our debts to succeeding next years due to revenues from minerals plummeting as a result of this transaction.”

According to IMANI Africa, dividends are tiny and unreliable, while royalties are more stable.