header('Content-type: text/html; charset=ISO-8859-1'); Over GHC2.0bn realized minerals royalties and tax rates adjustment - News Guide Africa
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Over GHC2.0bn realized minerals royalties and tax rates adjustment




Adnan Adams Mohammed


A recent study has shown that Ghana raked in additional mineral revenues of GH₵ 2.1 billion (US$713.9 million) from royalties and taxes between a period of 15 year.


Improvement in mineral royalty, as a result of adjustment in the royalty charges from 3 to 5 percent, contributed a total of GH₵1.25 billion (US$417.1 million), translating into 57.8% of the total addition and improvement in corporate tax, also as a result of adjustment in the rate from 25 to 35, contributed GH₵ 913.5 million (US$295.8 million), translating into 42.2% of the total addition. Also, other revenues contributed a total of GH₵1.6 million (US$1.5million).


This brings the additional total direct contributions of GH₵ 2.16 billion (US$713.9) to government revenue from the mining sector. The study conducted by Ghana’s Extractive Industries Transparency Initiative (GEITI) with technical and financial support from GIZ and executed by Scanteam from 2004 and 2018 indicates that, significant portion of this amount came from the reviewed royalty and corporate taxes resulting from the changes in these fiscal rates between 2010 and 2018 in line with GHEITI’s policy recommendations.


“The GHEITI reconciled mineral revenue growth as a percentage of total Government domestic revenues, increased from a mere two percent (2%) in the base year period of 2004/2005 to a stabilised rate of four percent (4%) during the period (2010-2018)”, the report said; “A Study On The Revenue Impact Of GHEITI-inspired Fiscal Reforms In Ghana’s Mining Sector” which was launched fortnight ago captured. “This was also the period when the majority of GHEITI-recommended policies were implemented.”


However, the total cumulative ‘government take’ mineral revenue of GH₵ 10.6 billion (US$4.2 billion) was realised between 2004 and 2018. This amounts to an average of GH₵ 706.6 million ($280 million) realised between 2004-2018, compared to the baseline revenue average of GH₵ 46.3 million (US$51.4million) in 2004/2005. In nominal terms, this is about 15 times more in 2018 than was in 2004/2005.


According to the report, fiscal rate appreciation from 3% to 5% for royalties and 25% to 35% for corporate taxes were the major policy impact in terms of additional revenues to government, compared to other measures.


The estimation took cognisance of the stability agreement between the Government of Ghana and Newmont mining company on one hand and AngloGold Ashanti on the other hand as well as the renegotiated fiscal rate of AngloGold Ashanti and Gold Fields mining companies between 2017 and 2018. But the impact of the AngloGold Ashanti and Gold Fields fiscal rate changes in 2017 & 2018 were largely muted because they both still paid royalty at 3% due to the applicable market price/oz of gold within the period.


Other mineral revenue additions which came as a result of GHEITI’s advocacy also accrued to institutions other than central government.


These include mineral ground rent and license/ environmental permit fees. These additions were estimated at GH65,028,490 million. A total of GH32.4 million ground rent accrued to landowners while GH33.4 million accrued to state institutions such as the Minerals Commission and Environmental Protection Agency (EPA) as licenses/environmental permit fees.


Recent investments in the mining sector have also been remarkable. Yearly investment in the mining sector have increased significantly over the years from a low of $231.78 million in 2000, peaking at $1.4 billion in 2012 before declining slightly to 953.17 in 2018[1]. This growth has stayed relatively stable over the period.


The report relied on the evidences of documented GHEITI policy recommendations, their specificity, timing and engagements as well as key informants’ confirmations of these policy impacts. Almost all the key informants agreed to the policy impact of GHEITI in the mining sector. This and other views were important in arriving at the conclusions of this report.


GHEITI’s work has also regularly featured in the national economic policy and budget statements. Other reports featuring the involvement of other Government Ministers/officials in GHEITI’s work attest to the familiarity of GHEITI’s policy recommendations to the Government. These and many other involvements of Government in GHEITI’s work may have played a significant role and are testaments to the policy successes.


The impact of GHEITI-inspired policies was noted to have a two-dimensional effect, first, the indirect impacts and second, the direct fiscal impact of the policy recommendations on government revenues. 


Indirect impacts are impacts which could not be readily quantified in monetary/fiscal terms but have contributed qualitatively in enhancing mineral revenue performance. They include such issues as enhanced tax compliance, mineral purity, pricing, and revenue assurance, some of which led to the adoption of best practice approaches by sector institutions such as the GRA to improve on mineral revenue transparency. For example, for revenue assurance, a total of Ghc 700.6 million (absolute figure) being discrepancies between companies’ payments and Government’s receipts were reconciled. While Ghc 630.4 were resolved with available documentations, a net stream of unresolved discrepancies booked in the GHEITI reports (2004-2018) was GH -17,739,348. The reconciliation therefore ensured a regular flow of revenue streams to government and can be viewed rather qualitatively in its absolute terms.


Since its inception in 2003, GHEITI has generated many reports and data for public engagements. About 15 mineral revenue reconciled reports, annual activity reports and several newsletters have been published.


GHEITI provides a useful platform for policy engagement. The collaboration among corporations, CSOs and government in promoting transparency and accountability in the mining sector has so far been commendable. It has seemingly reduced the mistrust, which previously characterised the relationship among these key stakeholders, and has helped to procure the social license for a thriving mining industry in Ghana.


In the decade 2000- 2010, the industry saw relative stability in Ghana. And after several years of delay (2004-2010) in implementing GHIETI recommendations for the review of fiscal provisions of the sector, the Government instituted some reforms in 2010 which, saw the royalty rate change from the sliding scale of three to six percent (3-6%) to a flat rate of five percent (5%), and in 2012 the review of corporate tax from 25 percent to 35 percent. Still in 2012, the Government reviewed the capital allowance from the first-year allowance of 80 percent and the subsequent years at 50% on the reducing balance to 20 percent on straight-line basis over five (5) years.


The study estimated the revenue baseline from 2004 and 2005 being the preceding base years marking the start of the EITI implementation in Ghana. Also, the report established the additional/ decline in revenue accruing from the fiscal policy reforms inspired by GHEITI.


Six (6) revenue streams that constituted ‘government take’ within the scope of the study with respect to the GHEITI reconciliation reports (2004-2018) and other miscellaneous additions were considered in this study. These revenue streams include: corporate tax, mineral royalty, property tax, ground rent, license fees, dividends and other miscellaneous additions resulting from GHEITI’s recommendations. The study therefore established some additional revenue, accrued from the fiscal policy reforms inspired by GHEITI.



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