National Coalition on Mining commends Government on mining taxes

The National Coalition on Mining (NCOM) on Tuesday commended government for the new fiscal initiatives introduced in the mining sector in the 2012 budget statement, saying it was in line with steps that were urgently needed to improve the contribution of the sector to the economy and people of Ghana. It has therefore called on government to ignore complaints from mining companies about these initiatives and rather proceed with immediate implementation of these new taxes and the critical review of the fiscal regime and mining agreements.

“The upward adjustment and an overhaul of the fiscal regime constitute a set of actions that ensure that the country improves upon its share of benefits from mining sector,” the Coalition said in a statement signed by Abdulai Daramani, Programme Officer Environment Unit Third World Network.

In the 2012 Budget Statement and Economic Policy presented to Parliament by the Minister of Finance and Economic Planning Dr. Kwabena Duffour announced an increase in corporate tax rate from 25 per cent to 35 per cent.

It also said government would impose a windfall profit tax of 10 per cent, and implement a uniform regime for capital allowance of 20 per cent for five years for mining companies as well as review the principle of ring-fencing as applicable to the Natural Resources Sector in 2012 to prevent companies undertaking a series of projects from deducting costs from new projects against profitable ventures yielding taxable income.

The mining industry has expressed concerns about the increases and said it would hurt their operations.

“The Coalition is calling on government to ignore these usual unfounded complaints as they are simply a smokescreen to cover the super profits the industry has enjoyed under the long years of liberalised mining regimes in Ghana and Africa as a whole,” the Coalition said.

The complaints are also a subtle threat to any further reforms to increase or introduce additional taxes to raise revenue and improve the developmental impact of mining in Ghana.

“Many times, mining companies put forward the cost of inputs as a reason not to increase taxes. The long years of incentives especially huge capital allowances, carry forward of losses, exemptions on duty for equipment imported are major contributions made by the state towards tooling and re-tooling mining companies.

"The state also deserves a recovery of such contribution in times of high prices of minerals and metals,” it said.

The Coalition said the decision by Ghana to raise corporate tax and re-introduce the windfall tax is not an isolated act on the continent.

It cited examples of Zambia, which increased taxes in order to raise its share of mining revenue in the face of similar hostility and threat from the mining companies when the world price of copper increased by nearly 400% between 2000 and 2007.

The Republic of Guinea recently passed a new mining code in which taxes and state equity were raised to optimise government revenue.

In Tanzania and the Democratic Republic of Congo the surge in mineral prices have sharpened and widened public debates about the costs and benefits of mining.

At the African Union level as well as ECOWAS and SADC, governments and inter-governmental agencies like the United Nations Economic Commission for Africa have lined up alongside civil society organisations (CSOs) in seeking a revision of existing mining contracts as well as of the codes under which they were granted.

“Ghana and Africa as a whole cannot continue forever with investment relations in which mining production remains enclave with no linkages and local value-addition, private mining companies pay land rent of GHc0.50 per km2 per annum, stability agreements lock government royalty receipts to only 3 percent, the environmental and social cost of mining is externalised to the public and communities, and human rights violations especially of communities in mining areas occur with impunity,” the Coalition said in the statement.

The National Coalition on Mining (NCOM) is a grouping of communities affected by mining, NGOs and individuals engaged in mining sector advocacy. Third World Network-Africa is the secretariat of NCOM.