“I am sure the anticipation of the GRA is for the miners to be formalized and then asked to pay tax to the state because the state needs it. It is not for any one single person to pay tax. … But if you are doing illegal jobs of course you must be stopped because you cannot be taxed with that illegal job. But once one is earning income we should find ways and means to bringing you to the bracket to pay some tax to the state,” Dr. Aubyn stated.
Government under the revised Income Tax Act, 2015, (Act 896), hopes to broaden the tax net by directing purchasers of unprocessed minerals from unlicensed, small-scale and artisanal miners to pay a 10 percent withholding tax.
The commission argues the Mining Act 703 allows for small scale mining, which is the preserve of Ghanaians only to pay a minimal fee before going into business.
“Let’s remember that these small scale miners both legal and illegal ones contribute over a million ounce of gold to the total production in the country,” the Minerals Commission CEO intimated.
Small-scale miners cause revenue losses
In 2014 alone the small-scale, artisanal and illegal mining business, accounted for 34 percent of national gold output representing approximately 1.6 million ounces.
Ghana is estimated to be losing annually some 500 million Cedis in taxes and royalties to the artisanal, small-scale and unlicensed gold miners. the new withholding tax on the purchase of unprocessed minerals is in line with efforts by government to broaden the tax base.
Earnings from the 10 percent tax are expected to make up for the losses the country incurs through the operations of the small-scale, artisanal and illegal miners as a result of non-payment of royalties and other tax revenues.
GRA explains position
A Deputy Commissioner in charge of Policy Programs at the Ghana Revenue Authority, Edward Gyambrah, speaking at a media interaction in Accra explained that before the new Act’s introduction, activities of artisanal and illegal miners paid no taxes except for value added tax (VAT) on their inputs.
He however also disagreed with concerns that the disorganized nature of the miners will render the new tax ineffective, explaining that measures are in place to help get every operator in that segment to comply as the Minerals Commission embarks on an exercise to register them.
“Because they are difficult to reach, we are saying that when buyers buy their products, they should withhold; and that is the only way we can get them to also contribute to revenues, we are also depending on the minerals commission to formalized their operations which will make it more easier”
The Mining and Minerals Act 2006, Act 703 does not differentiate between small scale and large scale operations in terms of royalties and both are liable for royalty payment.
Civil societies comment
The 2012 and 2013 report of Ghana Extractive Industries Transparency Initiative (GHEITI) has recommended that “royalties paid be differentiated between large scale and small scale holders” whilst royalty payment may be instituted at the point of export for the small scale operators.
Meanwhile the parent body of the small scale miners, Ghana National Association of Small Scale Miners (GASSM), are unhappy with government’s action as they say it will cripple the already unpredictable mining sector.
A source within the GASSM says 10 percent withholding tax currently being charged on gold is unplanned and not well categorized to target the chain of producers at the local level.