World Bank Group explains the challenges and successes of Ghana's mining sector.
The mining sector also suffers because tax and fees are collected by numerous administrations with unclear responsibilities, weak capacity and lack of coordination. As a result, the government's Large Taxpayer Unit relies on self-assessments of mining companies, and does not have adequate expertise to check accounts and perform audits. A review of exemptions conducted by the government in 2010 did not include the mining sector. Besides, if the Mining Act of 2006 grants responsibility to Parliament to ratify large mining leases and contracts, the performance of these responsibilities is affected by executive dominance, and thus checks and balances supposed to secure independent control are rendered dysfunctional. Also, cases of conflict of interest have been occurring recently, with members of the Parliamentary Select Committee directly involved in mining activities and sitting on boards of companies.
In recent years, budget laws have tried to improve mining revenue collection. In 2010 the royalty rate was raised from a 3-6% range to 5% and its computation was simplified to limit tax evasion. However, stability clauses prevented their broad implementation, as the two largest mines, representing 40% of total output, stayed insulated. In 2012, the government introduced a 10% windfall tax and a capital gains tax on mining concessions, increased corporate tax from 25% to 35%, limited yearly capital allowances to 20% of corresponding capital expenditures, and prevented companies from transferring costs between mines to inflate costs. A renegotiation team was set up to harmonise agreements and accounting rules for assessing mineral revenue through legislative instruments for Act 703, and a mineral revenue task force was set up to coordinate collection efforts.
The more recent fiscal and regulatory petroleum regimes also try to address the shortcomings encountered in the mining sector. The fiscal regime includes a 5% royalty on production, a 35% corporate tax, a 20% capital allowance, and a progressive windfall tax (additional oil entitlement) depending on the value of the rent (above the unit cost of $50/barrel). The Petroleum Revenue Management Act 815 of 2011 clarifies revenue collection provisions and responsibilities for the upstream oil and gas sector, while the Petroleum Commission Act 821 of 2011 clarifies regulatory responsibilities and confines the role of the Ghana National Petroleum Corporation to commercial operations.
Progress is being made defining and agreeing on realistic local content objectives and obligations. Regulations are being developed, in consultation with the mining sector, to give effect to mining code provisions on local content. While the code requires preference to be given to local companies that can match the cost and technical aspects of imported products, these provisions have so far not been sufficiently developed and enforced. In the face of this, Ghana's Chamber of Mines has undertaken a process of identifying opportunities to increase supply and assess support needs of local enterprises.
Source: Policy Research Working Paper: Investing Mineral Wealth in Development Assets: Ghana, Liberia and Sierra Leone (June 2012)
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|Comment:||World Bank Group explains the challenges and successes of Ghana's mining sector.(Mining)|
|Date:||Jan 1, 2014|
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