Ghana Extractive Industries Transparency Initiative

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Ghana Extractive Industries Transparency
Initiative

• Presentation on Mineral Royalties Disbursement
• By Dr. Gad Akwensivie
• Office of the Administrator of Stool Lands, HQ
• Email gadosman_at_yahoo.com

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• T-H-I-N-K-I-N-G
  
  C-O-R-N-E-R
• CHANGE IS THE ONLY THING WHICH IS CONSTANT ON
  EARTH BUT CHANGE DOES NOT HAPPEN UNTIL THE NEW
  STATE BECOMES EFFECTIVE AND MANAGED
• 
  
• 
  - ANANYMOUS

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• Overview of Revenue streams from Mining activity
• Capital gains Tax
• Dividends
• Corporate income tax
• Ground Rent
• Property Rates
• Mineral Royalties

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• Ownership of Minerals in their natural state
• Article 257 sections (6) of the 1992 constitution
  of the republic of Ghana as well as Section 1 of
  the Mining and Minerals Act 703 (2006) describes
  minerals in their natural state as belonging to
  the state. Reads
• Every mineral in its natural state in, under or
  upon land in Ghana, rivers, streams,
  water-courses throughout the country, the
  exclusive economic zone and an area covered by
  the territorial sea or continental shelf is the
  property of the Republic and is vested in the
  President in trust for the people of Ghana

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• Mineral companies are by law required to pay
  mineral royalties (a range of between 3 and 6 of
  the value of gold they mine) to the state. This
  is paid to the Large Tax Unit of the Internal
  Revenue service who then pays into the
  consolidated fund.
• 80 of the mineral royalties paid by mining
  companies to internal revenue service is retained
  by government in the consolidated fund.
• 10 is paid from the consolidated fund to the
  Minerals development fund
• 10 is paid to the Office of the Administrator of
  Stool Lands (OASL)

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• Disbursement of Mineral Royalties
• The Office of the Administrator of stool Lands
  disburses mineral royalty to beneficiaries
  according to the constitutional formula as spelt
  out in Section 267 (6) reads
• 10 of revenue accruing from stool lands shall be
  paid to the OASL to cover administrative
  expenses. The remaining revenue shall be
  disbursed in the following proportions
• Twenty-five per cent to the stool through the
  traditional authority for the maintenance of the
  stool in keeping with its status
• Twenty per cent to the traditional authority and
• Fifty-five percent to the District Assembly
  within the area of authority of the stool lands.

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• The constitutional formula does not apply to
  Mineral Royalties paid by Mining firms because
  minerals are the property of the Republic of
  Ghana, vested in the state for and on behalf of
  the people of Ghana. This implies that mineral
  royalties are not considered as land revenue.

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• Current Disbursement of Mineral Royalties
• Government/Consolidated Fund 80
• Minerals Development Fund 10
• Office of the Admin. of Stool Lands 10
• Total 100

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• Disbursement to the Communities
• Administrator of Stool Lands retains 10 of the
  amount received to cover administrative expenses.
  The remaining 90 is apportioned as follows
• 55 to District Assemblies
• 25 to Stools
• 20 to Traditional Councils

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• Extracts from the Draft Regulation on the
  Minerals and Mining Act, 2006 (Act 703)
• Liability for royalty
• Every holder of a mining lease, restricted
  mining lease, or small scale mining license is to
  pay royalty to the Republic in respect of the
  mining operations at the rate specified in the
  Schedule to these Regulations

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• Extracts from the Draft Regulation on the
  Minerals and Mining Act, 2006 (Act 703) Contd
• Liability for royalty
• A person who obtains ore or tailing or any
  material from a holder of a mining lease,
  restricted mining lease or small scale mining
  license for the purpose of wining minerals may be
  required by the minister to pay royalty on behalf
  of the holder of the lease or license in respect
  of any minerals won from the operations

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Extracts from the Draft Regulation on the
Minerals and Mining Act, 2006 (Act 703) Contd

• Liability for Royalty
• Notwithstanding to the contrary in these
  Regulations, a holder of a small scale mining
  lease shall pay royalty at the rate of three per
  centum of the total value of minerals obtained
  from the operations.

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Extracts from the Draft Regulation on the
Minerals and Mining Act, 2006 (Act 703) Contd

• Variation of rate of royalty
• The rate of royalty payable under these
  Regulations may be varied on the basis of
  profitability of the mining operations
• The profitability of a mining operation shall
  be determined by the application of the operating
  ratio, expressed in terms of percentage, which
  the operating margin bears to the value of the
  minerals won from the mining operations during
  the yearly period.

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Extracts from the Draft Regulation on the
Minerals and Mining Act, 2006 (Act 703) Contd

• Variation of Rate of Royalty
• For the purpose of determining the operating
  margin, the operation cost shall be deducted from
  the mining operations.
• A person liable to pay royalty under these
  Regulation shall within thirty days after the
  expiration of every yearly period, submitted to
  the Commissioner returns stating in detail the
  total value of minerals obtained by the holder.

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Extracts from the Draft Regulation on the
Minerals and Mining Act, 2006 (Act 703) Contd

• Royalty payments to be made monthly
• A person liable to pay royalty under these
  Regulations shall within fifteen days after the
  expiration of every month pay to the Republic on
  account, royalties at the minimum rate of three
  per centum of the total value of minerals
  obtained by the holder

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Extracts from the Draft Regulation on the
Minerals and Mining Act, 2006 (Act 703) Contd

• Offences
• Any person who
• - fails or refuses to pay royalty payable by the
  person or
• - makes or submits a false declaration in respect
  of the persons operation costs or the value of
  minerals won or
• - contravenes any of the provisions of these
  Regulations

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Offences Contd

• commits an offence and is liable to the same
  punishment for which a person would be liable for
  failure or refusal to pay income tax or for the
  contravention of similar provision under the
  INTERNAL REVENUE Act 2000 (Act 592)
• Notwithstanding sub-regulation (1) where a person
  is found guilty of an offence under these
  regulations the Minister may, in addition to any
  punishment which a court may impose, cancel or
  suspend the lease or license held by the person.

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Recent Occurrences

• Formulation of guidelines for the use of mineral
  royalties by District and Municipal Assemblies by
  the Ministry of Local Government and rural
  development, the Ministry of Lands and Natural
  Resource and Ministry of Finance and Economic
  Planning.

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Recent Occurrences Contd

• Proposal by Chiefs and Traditional rulers (
  National House of Chiefs) for an increment of the
  share of Mineral Royalty paid to beneficiaries
• Minerals Development Fund Bill to be laid before
  parliament to give legal backing to the
  disbursement of mineral royalties to communities
  where mining activities take place. It is hoped
  that the passing of this bill will be expedited.

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Recent Occurrences Contd

• OIL and GAS. With the discovery of Oil and Gas in
  commercial quantities, there is an on going
  debate in the country how royalties from oil and
  gas should be treated. Lessons will be learnt
  from neighboring countries such as the Nigeria
  (Niger Delta, etc) to ensure that the oil find
  remains a blessing and not a curse.
• THE END!