The Ghana Chamber of Mines has called on government to increase its cash cows through diversification and integration instead of the excessive taxation on mining.
At an interaction with the media yesterday in Accra, Tony Aubynn, Chief Executive Officer (CEO) of Ghana Chamber of Mines, in a presentation themed: ‘The mining industry in Ghana – is it misunderstood’ said too much taxation could disrupt and “kill the hen that lays the golden eggs.”
According to him, mining must be seen as a catalyst for development but not an avenue to exploit.
“Mining is a complex business and the industry needs to engage relevant stakeholders, educate and inform them. In addition, mine lives are planned alongside predictable fiscal regimes to ensure profitability and sustainability.”
De Aubynn said mining companies were not insulated from the adverse impact of the global economic turmoil, adding that in spite of the challenges, Ghana’s mining sector performed quite creditably in 2011.
According to the Ghana Statistical Service and Ministry of Finance & Economic Planning, the mining sub-sector grew at a remarkable rate of 14.3 percent in 2011. This compares favorably with the 8.6 percent recorded in 2010.
Also, total merchandise export earnings from traditional minerals were about 48 percent of gross merchandise exports.
The CEO emphasised that the mining sector was the leading taxpayer and highest contributor to the Ghana Revenue Authority (GRA).
It contributed about GH˘1 billion to GRA, representing 27.61 percent of total GRA collections in 2011 and paid GH˘ 645 million in corporate tax, representing 38.26 percent of the total company tax collected in 2011.
Additionally, he said the sector voluntary contributed an amount of about GH˘43 million to their communities and the general public, contributed about 42 percent of gross merchandise exports earnings while companies returned about $3.1 billion, representing 75 percent of their mineral revenue through the Bank of Ghana (BoG) and the commercial banks in 2011 against the statutory requirement of 25 percent.
“Because of the transnational nature of mineral-producing companies, they are able to attract world class service providers into the country.
“They also transfer knowledge, skills and technologies through their staff and other customers.
Notable sectors that have benefited from the mining industry include banking and financial services, transport and logistics, hospitality and catering, consulting-environmental and engineering services, manufacturing and fabrication.
It would be recalled that the fiscal regime changes in Ghana this year alone involved the imposition of fiscal measures on the mining companies which has seen a change in mineral royalty from a range of 3 to 6 percent to a flat rate of 5 percent.
Its capital allowance changed from 80 percent in the first year and 50 percent on declining balance to a straight line amortization over 5 years at 20 percent each year. There has also been a ring-fencing of assets for the purposes of determining tax payable while corporate tax increased from 25 percent to 35 percent in addition to a review of Stability Agreements and a proposed windfall profit tax of 10 percent.
A report by RBC Capital Markets in May, this year, put the country’s GDP at $71 billion or US$2,931 per capita, according to International Monetary Fund (IMF) 2011 estimates, which is relatively high by West African standards.
It noted: “Ghana has experienced double-digit GDP growth in recent years driven by the strength of commodity prices.
‘On the other hand, recently proposed tax increase to 35 percent from 25 percent and potential further 10 percent mining windfall tax have, in our view, done some damage to country’s reputation and it is likely to delay or halt development of some projects.”