Parliament has applauded the government’s new tax relief arrangement in the Exemptions Act 2022 (Act 1083), which allows the State to convert taxes into equity.
The legislature approved a US$38.66 million tax waiver for Import Duties, Import VAT, Import NHIL, Import GETFund Levy, Exim Levy, Special Import Levy, and other fiscal reliefs on materials and equipment imported by the Ghana Bauxite Company (GBC) as a strategic investor.
According to the Finance Committee report on the tax reliefs, GBC, as a strategic partner, has agreed to grant the State a commensurate equity in the company’s project.
During the approval of the tax reliefs, Minority Leader Ato Forson indicated that converting the US$38.6 million concession into equity would increase the government of Ghana’s stake in GBC from 20% to 23.56%.
No Freebies
He said, “This is the model I have always advocated for, because tax exemptions should not be free. For the first time, the Minister has complied with the PFM Act. Going forward, make sure that every tax exemption you waive for a company comes with equity. If it comes with equity, we will be compelled to support it. Otherwise, it is like freebies, but this is not one of them. I commend the Ministry for complying with the tax exemption law and converting taxes to equity.”
The Majority Leader, Alexander Kwamina Afenyo-Markin, backed the tax relief arrangement and urged the company to focus on Corporate Social Responsibility and employ more locals.
“Today, if the right thing has been done, and fortunately it is also owned by a Ghanaian, it is in the right direction. We encourage the company to focus on Corporate Social Responsibility for the people in the area. With the exemptions they are enjoying and the profits, they should not just focus on profits but also invest and employ more Ghanaians.”
The negotiated tax exemption for strategic investment with GBC allows the State to take an equity stake in the company equivalent to the amount of taxes and duties exempted by the State.
The report notes that the benefits of GBC’s project are substantial. When completed, the project will expand the company’s current labor force by 10% to 20%. The expansion is expected to create more indirect job opportunities for local businesses, such as food suppliers, raw materials and spare parts providers, and other service providers.
Summary of the Concession to Equity Conversion:
Amount Converted: US$38.6 million, Resulting Equity: 3.56% additional shares in Ghana Bauxite Company (GBC)
Government Valuation of GBC: US$1,085,000,000, Current Government Stake: 20%
New Government Stake After Conversion: 23.56%.
Ghana Bauxite Company Limited (GBC) was the first bauxite mining company in Ghana. Originally called British Aluminium, it began operations in 1941 and was incorporated in October 1974 under the Companies Code (Act 179).
GBC is currently jointly owned by the Ghana Integrated Aluminium Development Corporation (GIADEC) and a Ghanaian Consortium led by Ofori-Poku Company Limited (OPCL). Since the change in ownership, GBC has enhanced its operations and increased its production capacity from 500,000 metric tons per annum to 1.5 million metric tons to meet growing market demand for bauxite.
Global bauxite production increased by about 27% in 2022 due to rising demand. Projections based on current global trends reveal that both production and market demand for bauxite are expected to rise in the near future. GBC has been expanding its operations to take full advantage of these trends. The company has applied for and been granted Strategic Investor Status under the Exemptions Act 2022 (Act 1083).
Pursuant to Section 15 of the Exemptions Act 2022 (Act 1083), the Government agreed to a specially-negotiated tax exemption for strategic investment with GBC, where the State would take an equity stake in the company equivalent to the amount of taxes and duties exempted by the State.
GBC has procured plant, machinery, equipment, and other logistics to augment its efforts to expand operations. Following its Strategic Investor Status, the company requested a waiver of customs duties, taxes, and other fiscal reliefs on the plant, machinery, and other items under the specially negotiated tax exemption for strategic investment.
Norvanreports