An industry assessment carried out by the Ghana Chamber of Mines has revealed that Ghana is losing potential mining investors to emerging mining destinations in the West African sub-region, particularly Burkina Faso.
This is as a result of Government’s position of charging mining companies Value Added Tax (VAT) on their exploration inputs, which has persuaded some companies previously exploring in Ghana to relocate to Burkina Faso which has a more competitive fiscal regime for mining exploration activities.
This is because monies that go into exploration – a risky venture since there is no guarantee that exploration will ultimately lead to an actual mineral find in commercially viable quantities – might not be recouped and government might not necessarily refund the VAT on exploration when no deposits are found. In neighbouring Burkina Faso there is zero tax on mining exploration. This is making that country a preferable destination for mining exploration investors, despite Ghana’s clearly better mineral endowment.
According to the Chamber of Mines, it has consistently discussed this with government through its Economic Management Team for some time to consider exemption from VAT on exploration inputs in the mining sector, but the latter’s response of incorporating this in the national budget policies and fiscal projections has not reflected the Chamber’s entreaties.
Instructively, experts in the industry have quantitatively analyzed the potential gains Ghana stands to benefit from the removal of taxes on exploration in the sector and found that Ghana is losing rather than gaining from the continued imposition of those taxes.
A key benefit is that it would encourage more potential mining investors – both foreign and domestic – to begin exploration in the industry. This would enable the State to have more mineral deposits from which to derive direly needed foreign exchange revenues and some of those deposits would become available purposely for community mining, even if discovered by foreign multinationals since such companies only develop mines where the deposits identified are more than the minimum threshold that each company sets as being commercially worth the investment required.
Besides. more Ghanaian investors would venture into exploration thereby boosting local participation if taxes on exploration were removed thereby making that activity cheaper and less financially risky.
Speaking with the Goldstreet Business during a working visit to the Newmont Gold Akyem mine in the Eastern Region, Director of External Relations and Communication of the Ghana Chamber of Mines, Ahmed Nantogmah said Government recognizes the positive impact removal of taxes on exploration would bring to the nation, but is yet to take the needed actions.
“If you don’t give exemptions to get the critical mass, when the little pot you have runs dry, that will be the end”, he cautioned.
At the 2019 annual general meeting of the Chamber, its president, Eric Asubonteng, warned that
“Data shows that for a country to which mining is so critical in terms of the attainment of forex and fiscal revenue targets, exploration investment has significantly dwindled in recent years.
Exploration is certainly the single most critical activity that guarantees the continuous discovery of mineral resources to supplement production from existing mines or replace mines that cease to operate.
We wish to use this platform to call on the Ministry of Finance to consider removing the VAT on exploration inputs as well as other fiscal requirements that encumber investors.
Afterall, this will benefit more local businesses who hold the majority of exploration licenses in this respect and we need to attract more and more local investors into the sector.”
Source: Goldstreet Business