Gas Infrastructure Development Project to enjoy tax waiver
Parliament yesterday approved a tax waiver amounting to $152 million on goods and equipment imported or purchased locally for the Western Corridor Gas Infrastructure Development Project (WCGIDP).
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They include Customs Duties, Value Added Tax (VAT), National Health Insurance Levy, Destination Inspection Fees, Export Development Investment Fund, ECOWAS Levy and withholding taxes.
The request for the tax waiver was presented to Parliament by the Minister of Finance, Mr Seth Terkper, on October 2, 2014, and the Speaker referred the request to the Finance Committee for consideration and report.
Yesterday’s approval followed the presentation of the report of the Finance Committee by the committee's chairperson, Mr James Avedzi.
Committee's report
Mr Avedzi said the tax waiver was to ensure that the government did not incur additional cost on the project.
He said the Ghana Revenue Authority (GRA) had assessed the applicable taxes, duties and levies on equipment, materials and other general items required for the execution of the project for which exemptions were being requested.
Mr Avedzi explained that the tax exemptions by the government were an obligation under the contract signed between the Ghana National Gas Company (GNGC) and Sinopec International Service Corporation (contractor).
He said the GNGC undertook, as part of its obligations, the responsibility of paying any and all taxes with respect to the agreement and to reimburse the contractor for all taxes imposed on the contractor by the government.
"The exemptions are, therefore, to fulfil the government's commitment under Article 9.5 of the contract and thus facilitated the work of Sinopec and ensured a timely commissioning of early gas infrastructure and to averted further gas flaring," he said.
Mr Avedzi said considering the fact that the project had already been executed and the granting of a tax waiver was a condition precedent and obligatory under the contract, failure to grant the waiver would constitute a breach on the part of the government.
Background
The government, in 2011, set up the GNGC to develop a national network of gas pipelines, treatment and storage facilities, as well as to carry commercial activities related to the safe and reliable operation of gas infrastructure.
To execute its mandate, the GNGC signed an Engineering, Procurement, Construction and Commissioning (EPCC) agreement with Sinopec to implement the WCGIDP.
Under the requirement of Article 174(2) of the 1992 Constitution, parliamentary approval was a pre-requisite to issuing any tax exemptions.