Empower PIAC to oversee the natural resource sector

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The mandate of the Public Interest and Accountability Committee (PIAC) should be reviewed to include the other natural resource revenues if the creati...

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The mandate of the Public Interest and Accountability Committee (PIAC) should be reviewed to include the other natural resource revenues if the creation of a similar institution would be seen as a duplication of function, tax governance expert Mr. Abdallah Ali-Nakyea has proposed.

Dr Steve Manteaw, PIAC Chairman

PIAC, established by the Petroleum Revenue Management Act, 2011 (Act 815), is tasked with the oversight responsibility of monitoring and evaluating management of Ghana’s petroleum resources by government and relevant stakeholder institutions.

But owing to how the mining sector revenue has been managed over the years, many industry experts and civil society groups have insisted the creation of a ‘policing’ institution like PIAC will significantly deepen accountability and improve its utilisation.

For instance, the mining industry accounts for 5 to 10 percent of Gross Domestic Product (GDP) and 45 percent of total exports – with gold alone contributing 90 percent of total mineral exports.

While Ghana is said to be Africa’s 2nd largest gold producer and 10th in the world, some US$17billion in value was invested into the mining sector between1983 to 2016 – and it has become highest gross foreign exchange earner.

In 2014 and 2016 alone, Ghana produced about 249 metric tonnes of gold which was equivalent to about 8.1 million ounces.

Furthermore, the minerals sector is rated as one of the highest contributors to Ghana Revenue Authority (GRA) and formed 16 percent of government’s revenue – Domestic Tax – in 2016; and also raked in GH¢1.46billion of GRA’s Total Direct Taxes in 2012, according to the Ghana Chamber of Mines.

However, notwithstanding the lack of accountability in using these revenues for development of the country, others consider that setting up another body to look into revenue management of the mining sector will be a duplication of function.

Alternatively, Ali-Nakyea said, PIAC should be empowered by a reviewing the Act that brought it into being, and others, to make it responsible for the entire natural resources revenue.

He explained that: “If we do not want to establish another body, we could add it to the functions of PIAC,” to be seen as having the responsibility of accountability and interest in the natural resource sector, thereby making its mandate broader.

He said the work of PIAC “bringing to the fore the lapses in the use of petroleum revenue is enough sensitisation” of the Ghanaian public and remains a key achievement of the Committee – contradicting a certain perception that the Committee is powerless if it is not able to sanction wrongdoers.

Otherwise, he suggested, the enactment of a comprehensive mineral revenue law similar to the PRMA to replace the Minerals Development Fund Act, 2016 (Act 912) – taking into consideration the peculiar context of mining.

He further added that a Mineral Revenue Holding Fund should be established with a clear distribution formula for distributing mineral revenues between central government and the communities.

“The community share of revenues should be transferred to the District Assemblies for community development – and disbursed in the same or progressively revised manner as currently enforced under the Mining Community Development Scheme in Act 912.”

Among other recommendations, he clarified that: “Provision should be made for the establishment of sovereign funds, including a Sovereign Mineral Fund, and stabilisation and heritage funds”.

The renowned tax consultant made this pronouncement in an interview at the backdrop of a workshop organised by the Institute of Financial and Economic Journalists (IFEJ) with support from GIZ, on ‘Addressing shortfalls in mineral revenue management’, in Koforidua.

Ali-Nakyea also noted that: “While tax incentives to some extent may encourage investment in the country, it appears that, thus far, tax incentives are doing more harm than good”.

He explained that tax incentives which are not properly managed provide an avenue for tax avoidance and tax evasion schemes.

“The tax revenue losses from tax incentives come from two primary sources: first, forgone revenue from projects that would have been undertaken even if the investor did not receive any tax incentives; and second, lost revenue from investors and activities which improperly claim incentives or shift income from related taxable firms to those firms qualifying for favourable tax treatment.”

An additional revenue cost of tax incentives results from erosion of the revenue base due to taxpayers abusing the tax incentive regimes to avoid paying taxes on non-qualifying activities or income.

Revenue losses, he opined, can also arise where taxpayers disguise their operations to qualify for tax benefits.

Source BnFT/IfejGhana

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