Minister clarifies mining taxes

New tax measures for mining companies are part of a fiscal rationalisation plan for the natural resources sector of the economy, says Seth Terkper, Deputy Finance Minister.

He told representatives of mining firms at a pwc budget forum in Accra that the new taxes on miners “are not meant to be anti-investment” nor kill the industry.

Next year, mining firms will pay 35 percent corporate tax, a ten-percentage-point increase over the current rate, and be subject to an extra 10 percent windfall tax. A new capital allowance rate of 20 percent for five years will also kick in -- to replace the current rate of 80 percent.

“The changes in the taxes are part of a rationalisation plan. Later on, other natural resource sectors will be brought on board. So, it’s not about targetting mining companies; and they are not meant to be anti-investment,” Terkper said.

He said it is the government’s intention to review its involvement and interest in the mining sector, and it has been engaging with miners on the changes it intends to bring about.

A national re-negotiation team has been set up, according to Finance Minister Kwabena Duffuor, to review the fiscal regime and mining agreements -- “with the view to ensuring that the country benefits adequately and fairly from the gains in the mining sector.”

Terkper assured that the government would respect so-called “stability agreements” with miners; but -- like it’s been able to do in the past -- would try to achieve a consensus on some of the changes in spite of the agreements.

The buoyant prices of metals are a key motivation of the government as it introduces these new measures. Gold prices have more than quintupled in the last decade, and the industry has flourished while mining communities remain poor and underdeveloped.

“During the recent global financial crisis, prices of gold reached their peak levels ever. Yet the country did not benefit at all from the price-hikes,” Duffuor said as he announced the additional tax measures last week.

Many have welcomed the changes. The Ghana Mineworkers’ Union said in a statement: “We are particularly happy with the introduction of the windfall profit tax for mining companies...We hope that the government will be resolute in its successful implementation.”

Another lobby, National Coalition on Mining, noted: “We view these steps as part of a set of actions that are urgently needed to improve the contribution of the sector to the economy. The government should proceed with immediate implementation of new taxes and the critical review of the fiscal regime.”

But miners have protested, arguing the changes will be a disincentive to investment in the sector. Tony Aubyn, president of the chamber of mines, reacted: “This stance will likely discourage investment and the expansion of current projects.

“We are not averse to government seeking to maximise its benefits from mining, but we should not do it in a way that will kill the industry.”

Felix Addo, Senior Partner at pwc, warned of the signals the new measures would send to investors -- particularly the attempt to renegotiate contracts.

“When investors bring in their capital and resources to invest here, they want to be assured that the rules of engagement will not be changed a few years after they have established their businesses.”