Mineral experts and lawyer, Kofi Ansah and Fui Tsikata, have in their third article dated, Thursday, December 14, 2023, delved into a paper by IMANI, a prominent Ghanaian think tank, aimed at “re-centring the discussion on the key issues raised by civil society organizations” concerning the Ewoyaa lithium transaction.
IMANI’s paper, dated December 13, 2023, puts forward two crucial observations that have prompted further commentary.
The first pertains to the potential impact of “inflated costs and complicated financing structures” on diminishing the monetary benefits Ghana could derive from taxes. The second expresses concern over boards having the discretion not to declare dividends.
Regarding the first observation, Kofi Ansah and Fui Tsikata, emphasize that irrespective of the contractual framework, whether concession contracts, joint ventures, or risk service contracts, the mechanisms of cost inflation and transfer pricing, can erode the benefits that should accrue to the state.
They stress the importance of fortifying institutions to identify potential diversion possibilities and plugging loopholes in tax administration. The authors argue against excusing fundamental methodological errors in benefit allocation calculations by referencing institutional vulnerabilities.
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They also clarify that cost inflation is irrelevant to certain elements of government revenue, such as royalty and the growth and sustainability levy, calculated based on an arms-length sales price.
The second observation from IMANI, focuses on the risk that boards may choose not to declare dividends, potentially depriving the government of revenue.
Ansah and Tsikata, propose a solution drawn from existing agreements in Ghana’s mining sector, suggesting that companies pay the government a certain percentage of their profit after tax in any year when dividends are not declared. This payment would be considered an advance payment, to be repaid from future dividends when declared and paid.
The authors express a keen interest in contributing to the development of a community where serious and constructive conversation supplants partisan disputes and opportunistic posturing.
This latest analysis by IMANI, adds depth to the ongoing discourse surrounding the Ewoyaa lithium transaction.
The observations and proposed solutions put forward by Ansah and Tsikata, contribute to a nuanced understanding of the complexities involved, sparking further debate among stakeholders in the public domain.
