AngloGold Ashanti has its own runway in connections with its gold mine, transporting minerals directly out of the country

© DanWatch/afrol News

afrol News, 25 May - A new study demonstrates how multi-national companies generate great revenues from Ghana's rich gold resources without leaving sums worth mentioning in the country. International tax havens make it possible to dupe Ghanaian coffers.

Today, the report "Golden Profits on Ghana's Expense – An example of incoherence in EU policy" was presented by the two Danish NGOs DanWatch and Concord in Copenhagen. As part of an effort to reveal how tax evasion and capital flight from developing countries is outnumbering development aid by a factor of one to ten, the report is a case study of how Ghana sees little revenues from its immense gold riches.

Ghana is a major mining country, and exports of minerals and metals in 2007 made up 43 percent of Ghana's total export revenue. Bauxite, manganese, diamonds and gold are all extracted in Ghana. In 2007, Ghana produced 83.6 tonnes of gold.

But, less than ten percent of Ghana's total tax revenue came from the mining industry and mining operations only contribute an estimated five percent to the Ghanaian GDP, according to the Ghana Minerals Commission.

Further, according to Steve Manteaw, one of Ghana's leading experts on national mining operations, studies had shown that these operations also have a negative effect on the environment that equals between four and ten percent of the country's GDP. "Thus, taking the mining operations' environmental consequences into perspective, the economic effect upon Ghana's GDP is in fact negative," the report says.

Among the reasons for the low economic impact of Ghana's massive mining industry is that, like in most African countries, mining corporations are offered significant tax advantages. "They are exempted from duties, for example on fuel and the import of machines, they pay a lower tax percentage, and they can reduce their tax base through special deductions," the report says, adding that "through aggressive tax planning, these corporations further diminish their tax payments."

African countries typically collect between 30 and 35 percent in corporate taxes from the mining industry. Ghana only collects 25 percent of the mining corporations' profits in corporate taxes. "However, many corporations manipulate their profits in Ghana so they appear lower than they really are, sometimes even making them so low that they are exempted from paying any corporation tax at all," the report says.

According to DanWatch and Concord Denmark, this can easily be done by the way multi-national companies are allowed to make their balances. "Corporations can move their profits to countries with low or even no taxation," the report says. "The most commonly used method for moving profits is transfer mispricing."

Ghana is among the ten low-income countries in the world that loses most of its

Tarkwa is one of Ghana's numerous mining cities, with approximately 40,000 inhabitants

© DanWatch/afrol News

entitled taxation as a consequence of price fixing, according to a calculation made by Christian Aid in 2009. "Since 2007, Ghana has thus lost approximately 36 million euros," according to the report.

In Ghana, the alleged transfer mispricing and fixed low local revenues also influence royalties of the value of extracted minerals, the other main state revenue from mining companies. Ghana calculates the royalty rate to a minimum of three percent, which is raised accordingly with the company's profits up to a maximum of six percent.

Low profits on paper will thus also ensure lower royalty payments, the report holds. The loss in royalty revenues could amount to hundreds of million of euros during the last decade, mining analysts have calculated.

According to DanWatch and Concord Denmark, there is little Ghanaian authorities can make to secure their fair share of the profit gathered by multi-national mining companies on their soil. "The current international tax regulation framework makes it impossible to estimate whether the corporations are paying a fair amount of tax to the developing countries, because they are only obliged to produce an annual report which covers the entire corporation group."

The two NGOs, joined by a large number of organisations calling for fair trade, are demanding international reforms that would oblige all multi-nationals to produce detailed country-by-country reporting balances. This increased transparency would enable governments and NGOs to better evaluate corporate tax contributions and transfers from mother to daughter companies over international borders.

The report also attacks the European Union over its double standards regarding taxation. Many of the world's leading tax havens are on European soil and the EU, in protection of its multi-nationals, has done little to halt this development.

Money lost to tax evasion by African countries, indirectly plunged back to the European and North American economy, is calculated to be ten times more than money spent on development aid for Africa. According to new research, in the period 1970 to 2008, Africa lost US$ 854 billion in cumulative capital flight. From 2000 to 2008, illicit outflows from Africa accelerated by 25 percent coinciding with a boom in mineral prices.

In addition to country-by-country reporting for multi-nationals, the report calls for sanctions against tax havens in Europe and beyond. Further, Ghana and other developing countries should be assisted in capacity building to help them collect their rightful taxes.

By staff writer

© afrol News

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