African Arguments

Top Menu

  • About Us
    • Our philosophy
  • Write for us
  • Contact us
  • Advertise
  • Newsletter
  • RSS feed
  • Donate
  • Fellowship

Main Menu

  • Home
  • Country
    • Central
      • Cameroon
      • Central African Republic
      • Chad
      • Congo-Brazzaville
      • Congo-Kinshasa
      • Equatorial Guinea
      • Gabon
    • East
      • Burundi
      • Comoros
      • Dijbouti
      • Eritrea
      • Ethiopia
      • Kenya
      • Rwanda
      • Seychelles
      • Somalia
      • Somaliland
      • South Sudan
      • Sudan
      • Tanzania
      • Uganda
      • Red Sea
    • North
      • Algeria
      • Egypt
      • Libya
      • Morocco
      • Tunisia
      • Western Sahara
    • Southern
      • Angola
      • Botswana
      • eSwatini
      • Lesotho
      • Madagascar
      • Malawi
      • Mauritius
      • Mozambique
      • Namibia
      • South Africa
      • Zambia
      • Zimbabwe
    • West
      • Benin
      • Burkina Faso
      • Cape Verde
      • Côte d’Ivoire
      • The Gambia
      • Ghana
      • Guinea
      • Guinea Bissau
      • Liberia
      • Mali
      • Mauritania
      • Niger
      • Nigeria
      • São Tomé and Príncipe
      • Senegal
      • Sierra Leone
      • Togo
  • Politics
    • Elections Map
  • Economy
  • Society
    • Climate crisis
  • Culture
  • Specials
    • From the fellows
    • Radical Activism in Africa
    • On Food Security & COVID19
    • #EndSARS
    • Covid-19
    • Travelling While African
    • From the wit-hole countries…
    • Living in Translation
    • Red Sea
    • Beautiful Game
  • Podcast
    • Into Africa Podcast
    • Africa Science Focus Podcast
    • Think African Podcast
  • Debating Ideas
  • About Us
    • Our philosophy
  • Write for us
  • Contact us
  • Advertise
  • Newsletter
  • RSS feed
  • Donate
  • Fellowship

logo

African Arguments

  • Home
  • Country
    • Central
      • Cameroon
      • Central African Republic
      • Chad
      • Congo-Brazzaville
      • Congo-Kinshasa
      • Equatorial Guinea
      • Gabon
    • East
      • Burundi
      • Comoros
      • Dijbouti
      • Eritrea
      • Ethiopia
      • Kenya
      • Rwanda
      • Seychelles
      • Somalia
      • Somaliland
      • South Sudan
      • Sudan
      • Tanzania
      • Uganda
      • Red Sea
    • North
      • Algeria
      • Egypt
      • Libya
      • Morocco
      • Tunisia
      • Western Sahara
    • Southern
      • Angola
      • Botswana
      • eSwatini
      • Lesotho
      • Madagascar
      • Malawi
      • Mauritius
      • Mozambique
      • Namibia
      • South Africa
      • Zambia
      • Zimbabwe
    • West
      • Benin
      • Burkina Faso
      • Cape Verde
      • Côte d’Ivoire
      • The Gambia
      • Ghana
      • Guinea
      • Guinea Bissau
      • Liberia
      • Mali
      • Mauritania
      • Niger
      • Nigeria
      • São Tomé and Príncipe
      • Senegal
      • Sierra Leone
      • Togo
  • Politics
    • Elections Map
  • Economy
  • Society
    • Climate crisis
  • Culture
  • Specials
    • From the fellows
    • Radical Activism in Africa
    • On Food Security & COVID19
    • #EndSARS
    • Covid-19
    • Travelling While African
    • From the wit-hole countries…
    • Living in Translation
    • Red Sea
    • Beautiful Game
  • Podcast
    • Into Africa Podcast
    • Africa Science Focus Podcast
    • Think African Podcast
  • Debating Ideas
Politics
Home›African Arguments›Politics›Ghana’s Mining Sector: increase in taxes spark opposition from sector – By Songhai Advisory

Ghana’s Mining Sector: increase in taxes spark opposition from sector – By Songhai Advisory

By Uncategorised
December 1, 2011
1940
0

Ghanaian Finance Minister Kwabena Duffuor gets fiscally tough on the mining industry

Songhai Advisory LLP is a bespoke business intelligence consultancy providing critical insight on market opportunities in Sub-Saharan Africa.

Finance Minister Kwabena Duffuor delivered his fourth budget to the Ghanaian National Assembly two weeks ago. The bill proposed significant changes to the mining sector fiscal regime, eliciting a volley of praise and opprobrium. Praise from civil society groups such as the National Coalition on Mining (NCOM) and opprobrium from industry representatives.

View from the Ground:

Accra-based Development Economist Nana Oye Afoom: “the tax increment is long overdue… more especially since [mining companies] do not pay for the negative externalities that occur as a result of their operations”

In any case, the proposed amendments should be understood in the context of longstanding government concerns about domestic revenue generation generally and the contributions of the mining sector specifically – as well as popular anxiety that the country is not getting a fair shake from its mineral wealth.

The 2012 budget proposals include:

  • An increase in the corporate tax rate for mining companies from 25 to 35 per cent
  • A windfall tax of 10 per cent to be collected from all mining companies
  • And a uniform capital allowance of 20 per cent for five years, instead of the current 75% initially, then 50% annually thereafter

This is not a new issue. In its 2005 report, “Rethinking the Role of FDI”, the United Nations Conference on Trade and Development noted that “Ghana earned only about 5 per cent of the total value of exports” coming from the mining sector. Similar comments have been made by the Bretton Woods institutions also. For example, in 2008 the IMF noted that Ghana’s “exceptionally generous incentives given as inducement to investors” had resulted in a minimal contribution to the country’s reserves and budgetary revenue. And before it left office in January 2009, the New Patriotic Party (NPP) made it clear that it viewed mining sector revenues as insufficient.

When the National Democratic Congress (NDC) took the reins with estimated fiscal and current account deficits of 14% and 21% of GDP respectively (old GDP figures), and international reserves at less than two months import cover, it had pragmatic reasons to continue in a similar vein. In its inaugural 2009 budget, the government pledge to “review mining, oil and forestry firms’ agreements to require them to repatriate part of their retentions in Ghana” and to renegotiate the mining sector legislation’s stability agreement. In 2010, Finance Minister Kwabena Duffuor went further and raised the minimum royalty from 3% to 5%, in a bid to rework “rates, fees and user charges that do not reflect the cost of public goods and services rendered”. The following year mining royalty payments were shifted from a quarterly to monthly timetable.

Even so, the 2012 budget appears to have surprised industry and has prompted a number of contingent questions – how and to what extent will existing and prospective mining investments be affected by the new legislation? How important is the new regime to revenue generation? And are we now seeing the reversal of the post-1980s liberal mining regime?

View from the ground:

Ministry of Finance and Economic Planning Tax Policy Advisor Dr Larbi-Siaw: “As an answer to a social concern, when you believe an industry is making more than the necessary return on its capital, one may bring a windfall tax… but I can assure you the windfall will not trigger without adequate protection… you will not pay the windfall until we have agreed with industry on the rate of return in the mining sector”.

What does this all mean?

Evidently mining companies operating in Ghana are seeing the ground shift beneath them. The very liberal system set up progressively since the 1980s is being adjusted. However, it would be too much to say that it is being reversed.

Of the five major gold producing companies in Ghana in the 1980s, the government owned two outright and held a major share in a third. Today the government holds 10-30% of the top ten mining companies in the country, and there are no moves to raise participation at this time. Fiscal terms are being changed, pushing up against but not out of sight of other comparable jurisdictions in the region.

Ghana 2012 South Africa Tanzania
Corporate Income 35 28 30
Capital Gains 15 28 n.a.
VAT 12 14 18
Witholding Tax 15[1] 15 15
Mining Royalty 5 0.5-7 4
Top Personal Income 25 40 30
Capital Allowances 20% for five years 40% in year one, 20% for the next three 100% for prospecting and development, 20%
Loss Carry-Forward Five years Indefinite Indefinite

 

Industry has expressed alarm. Chamber of Mines Chief Executive Toni Aubynn has been quoted by Reuters warning that “this stance will likely discourage investment and the expansion of current projects”. He added that while his organisation recognises the need for government to benefit from resource extraction, this needs to be done in a careful and sustainable manner.

The government has been quick to restate that this is part of a wider initiative to rationalise tax and raise revenues. Re-jigging the national accounts in November 2010 revealed a much larger economy and therefore a more meagre fiscal account deficit than had earlier appeared the case. However, it also put Ghana’s poor revenue generation in stark colours. According to the IMF, tax revenue as a proportion of GDP is lower in Ghana than in lower middle-income countries and Sub-Saharan Africa on average. According to Finance Ministry Official Dr Larbi-Siaw, this has not been done capriciously. Rather, it’s an attempt to bring the country in line with tax rates elsewhere in the region and to better reflect the new international price context – gold prices have risen significantly in recent years.

 

Outlook

Mining companies have expressed alarm at the tone of the debate and the pace of the 2012 budget proposals, warning that investment could be at risk.

However, Ghanaian government officials have been keen to point out that the government has not suddenly become anti foreign investment, rather these changes are an attempt to equalise the treatment of natural resources[2], to adapt to current international commodity prices and to bring Ghana in line with other similar jurisdictions. Moreover, the windfall tax will only be implemented after consultation with the industry.

That said, observers will be aware that Ghana is fast approaching an election year and pressing the mining industry is not going to lose votes – there are well established popular concerns that the sector has not paid its due.


[1] Withholding tax on foreign supply of services

[2] Corporate income tax for petroleum producers is 35% also

Previous Article

The Zambian declaration: It’s time for ...

Next Article

DRC Free and Fair Elections: towards a ...

Uncategorised

Leave a reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

  • Togo financial inclusion At a market in Lomé, Togo. Credit: Carsten ten Brink
    EconomyTogo

    Why Africa needs to make financial inclusion its 2022 priority

  • Celebrating Somaliland's 26th anniversary of independence in London.
    EconomySomaliland

    International recognition for Somaliland will boost prosperity in the Horn of Africa

  • Uganda elections 2021
    PoliticsUganda

    Anywhere but Kampala: “I’m still in NRM but I cannot clap for bad vices”

Subscribe to our newsletter

Click here to subscribe to our free weekly newsletter and never miss a thing!

  • 81.7K+
    Followers

Find us on Facebook

Interactive Elections Map

Keep up to date with all the African elections.

Recent Posts

  • The unaccountability of Liberia’s polluting miners
  • Africa Elections 2023: All the upcoming votes
  • “Poking the Leopard’s Anus”: Legal Spectacle and Queer Feminist Politics
  • Introducing Parselelo and a new climate focus
  • The ‘Hustler’ Fund: Kenya’s Approach to National Transformation

Editor’s Picks

Editor's PicksEgyptPoliticsSudan

This is how our revolution in Egypt failed. Sudan, please be warned.

After Egypt’s 2011 revolution, the military soon acted to retake power. Today, Sudan’s military is behaving and talking in the exact same way.  A revolution is like a train journey. ...
  • Fans at the ChillSpot tenth anniversary celebration. Credit: Kennedy Nyavaya.

    “Zimdancehall is dead”: Critics say ghetto sound was sold for a song

    By Kennedy Nyavaya
    July 21, 2022
  • ongwen wives uganda LRA

    “We need to stick together”: Meet the family made up of Ongwen’s ex-wives

    By John Okot
    June 15, 2021
  • Egypt’s sexual revolutionaries tackling the tyranny within

    By Mona Eltahawy
    October 20, 2021
  • Some amazing African documentaries, picked with help from Film Africa.

    Amazing African documentaries you’re gonna wanna see

    By Sally Zohney, James Wan, Adam Matan, Oumar Ba & Ketty Nivyabandi
    October 23, 2018

Brought to you by


Creative Commons

Creative Commons Licence
Articles on African Arguments are licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
  • Cookies
  • Privacy Policy
  • Terms & Conditions
  • en English
    am Amharicar Arabicny Chichewazh-CN Chinese (Simplified)en Englishfr Frenchde Germanha Hausait Italianpt Portuguesest Sesothosn Shonaes Spanishsw Swahilixh Xhosayo Yorubazu Zulu
© Copyright African Arguments 2020
By continuing to browse this site, you agree to our use of cookies.
en English
am Amharicar Arabicny Chichewazh-CN Chinese (Simplified)en Englishfr Frenchde Germanha Hausait Italianpt Portuguesest Sesothosn Shonaes Spanishsw Swahilixh Xhosayo Yorubazu Zulu