A Member of Parliament’s Select Committee on Mines and Energy, Joseph Cudjeo, has advised mining companies to negotiate for graduated tax obligations set off, rather than waiting on government to refund their Value Added Tax (VAT).
According to him, there should be an agreed set off schedule between government and the companies with respect to taxes; otherwise it would end up in bad debt.
Mr. Cudjeo, who is also as the Member of Parliament (MP) for Effia Constituency in Takoradi in the Western Region noted that the government was cash-strapped and would be difficult to issue a cheque to pay the millions of arrears, owed the mining companies to ease their financial burdens.
His call comes on the wake of recent unhappiness exhibited by the mining companies over government’s inordinate delays in refunding the VAT arrears worth over GHC250 million as at June 2014 to them.
“We are asking the government which is holding our GHC250 million to give it to us because the companies are going through challenges due to the recent dip in gold price”, the Chief Executive Officer of the Ghana Chamber of Mines, Sulemanu Koney stated at a day’s workshop in Accra.
The workshop was organised by the Journalists for Business Advocacy (JBA), in collaboration with Ghana Chamber of Mines to update the members of JBA on happenings in the mining sector.
Stating the constitution to back his claim, the CEO indicated that Section 27 of L. I 1646 (VAT Regulations-1998) and relevant section of Act 870, allowed companies to charge Interest at BoG discount rate plus 0.25 of rate per day, a computed associated opportunity cost of about GHȻ 5.8 million but those monies due them were yet to be released to the mining companies.
According to Mr. Koney, the situation has caused hiccups in cash flow to the mining companies and forgone earning opportunities, making things difficult for them.
The CEO during the workshop called for an expedite action on Revenue Administration Act to allow mining companies to off-set tax liability against VAT refund but the MP expects the mines led by the chamber to make the first move.
In recognition of the princely VAT arrears owed mining companies, the government announced a set of measures to address the long delays in repaying the companies.
These measures which were contained in the 2015 Budget, suggested that the government would abolish the use of VAT Relief Purchase Order (VRPO) and replace it with a credible refund system to cover duty drawback, VAT refund and corporate tax overpayments.
Also, it mentioned that the current VAT refund account, in which 5 percent of VAT revenue is paid, would be replaced with a general refund account into which up to 5 percent of GRA collection would be paid.
Mr Koney in a presentation on Ghana’s minerals economy-contributions, opportunities and challenges was hopeful that these measures would permanently redress the perennial delay of VAT to the mining companies.
Aside the VAT refund debt, another huge challenge facing the mining industry was the access to regular supply of electricity, the CEO outlined.
“Since August 2014, the mining industry has been encumbered by planned and remote load shedding, resulting to materials solidifying in process plants which takes approximately two hours for sequential start up and normalization of the process plants and damage to sensitive equipment on the mines, especially the processing plants”, Mr. Koney noted.
He said in order to moderate the potential output loss associated with the curtailment in electricity (33% load reduction), most companies co-generate power from diesel-propelled plants adding that the imposition of the Special Petroleum Tax (17.5%) on petroleum products has exacerbated the cost of autonomous power production.
The CEO pointed out that while the high cost of primary inputs such as electricity and diesel, translated into high production cost, the ex-refinery price paid by mining companies for diesel was significantly higher than that of other users of diesel.
Mr. Koney requested government to prioritize mining companies in distribution of electricity and correction of inverted utility pricing structure.
Ghana Chamber of Mines was incorporated in 1928, with the objective and among others to promote and protect the interests of the mining industry.
The Chamber is a private non-governmental and voluntary organization representing the collective interest of its member-companies in Ghana.
By Paa Kwesi Agyefi
