COCOBOD still enjoys tax exemption - Finance Committee backtracks

Three years after recommending to Parliament that the 2017/2018 crop season should be the last time the Ghana Cocoa Board (COCOBOD) is exempted from the payment of tax stamp duty, the Finance Committee of the House continues to approve tax exemption for COCOBOD.

This year, the committee recommended that COCOBOD be granted US$6.5 million in tax exemption on its US$1.3 billion syndicated loan, a recommendation which was subsequently approved by the House.

Section 32 (6) of the Stamp Duty Act, 2005 (Act 689) requires that loan documents should be stamped at 0.5 per cent of the loan amount, however, COCOBOD has, over the years, been exempted from paying this stamp duty in order to ensure that the trade finance facility was used solely for the purchase of cocoa beans and related expenses.

This position is likely to change as the Finance Committee of Parliament in 2017 recommended to the house that COCOBOD should be made to pay for the stamp duties. This position was also supported by a Deputy Minister of Finance, Mr Kwaku Kwarteng.

The Chairman of the Finance Committee, Dr Assibey Yeboah, at the time told the Graphic Business in an interview that there was no justification for COCOBOD to continue enjoying the tax exemption going forward.

“They are going for a loan of US$1.3 billion and the small money that will come to the central government  through the stamp duty too, they want exemption,” he noted.

“The tax exemption for this year, for instance, is just over US$ 6 million, which if it had been taken by government would not have seriously affected COCOBOD in anyway,” he added.

However, fast forward to 2020, the committee which is still chaired by Dr Assibey Yeboah, continues to grant COCOBOD this tax freebie.

Parliament approves  US$1.3 bn loan

Parliament, last week Wednesday, approved a syndicated loan amount of US$1.3 billion to finance the purchase of cocoa for the 2020/2021 crop season by COCOBOD.

The amount represents a trade finance facility between the Ghana Cocoa Board and a consortium of banks and financial institutions.

The terms of the financing include the facility amount of US$1.3 billion, interest rate of one-month LIBOR+ 1.75 per cent per annum, commitment fee of 0.62 per cent per annum and upfront fees of 1.25 per cent flat.

The repayment of the principal is to be effected by seven monthly instalments beginning February 2021 and ending in August 2021.

Committee report

The Finance Committee in its report on the facility noted that the facility would be drawn down in two instalments based on the operational needs of COCOBOD.

Dr Assibey-Yeboah, presenting the committee’s report, said the trade finance facility was to enable cocobod to raise funds to purchase cocoa beans from licensed buying companies and to finance other operations of the board for the 2020/2021 crop season.

He said the waiver amount of $6,500,000 was in line with the provision of the Stamp Duty Act, 2005 (Act 689), which required that a Stamp Duty of 0.5 per cent on the loan facility be paid as stamp duty.

Cocoa producer price

The COCOBOD also informed the committee that it was yet to reach an agreement on whether to review the producer price of cocoa for the 2020/2021 crop season or not.

This is because the Producer Price Review Committee (PPRC), whose mandate it is to review the prices is yet to make any decision.

The officials of COCOBOD informed the committee that as and when the PPRC reviewed the price, COCOBOD would religiously implement same.

The producer price of cocoa in the country is currently GH¢515 per bag, after it was increased in 2019.