Let’s save the cash cow

The Minister of Finance Minister, Mr Seth Terkper, says the government is establishing a framework to repay more than GH¢250 million in VAT refund owed mining companies which are worried about the lock up of their money with government.

“It is true that we owe the mining companies so much, but we have begun instituting the necessary framework to refund those monies to them and we are also in discussions with the mining firms in that regard,” he said.

This, indeed, is welcome news because on many occasions the Ghana Chamber of Mines has expressed concern over the delay in the refund to mining companies VAT surplus which is affecting the cash flow position of the companies.

The government has often been accused of benefiting from mining companies by way of inordinate delays in the refund of surplus VAT, which was estimated about GH¢250 million as of June 2014.

The challenges facing the mining companies go beyond government’s withholding of their VAT fund. They are at pains with high production costs which are attributed partly to various taxes their industry attracts.

For instance, there is a distinct electricity tariff regime for mining companies, as well as a special petroleum tax. Also on a monthly basis, the mining sector cross-subsidises the consumption of social fuel such as premix by about US$5 million.

Mining companies in Ghana face the brunt of a business unfriendly tax regime, some analysts say. And yet, there have been calls for more taxes, with suggestions for the replication of a controversial Zambian model that the Zambians themselves have abandoned.

The Zambian government, in response to popular concerns for more mining revenue for the State, increased royalty to be paid by mining companies by a whopping 20 per cent. That spelt doom for the mining industry.

Ultimately, the Zambian government realised that the mining industry was not so fat a cow.

Another vexed issue is the payment of royalties. Nine per cent of royalties paid by mining companies is expected to be used to develop the mining communities. The utilisation of that money after it is paid to the State is as opaque as an eclipsed moon.

When it comes to the utilisation of mining royalties, there are serious transparency issues. There is no transparency in mining revenue use, with the only transparency being in the payment of royalties.

The royalties paid to mining communities may not be getting optimised utilization, one may easily discern.

For instance, between 2011 and 2013, US$854,407,800 was ploughed back into seven mining districts but the question is: was there a manifestation of commensurate development?

At the heart of these challenges is the absence of a Mineral Management Revenue Act which will make the government more responsible in the utilisation of mining revenue.