The Ghana Extractive Industries Transparency Initiative (GHEITI) is making a strong case to the government to urgently scrap the 3% Growth and Sustainability Levy (GSL) amid the new sliding scale royalty regime.
GHEITI is warning that keeping the tax in place alongside the newly introduced mineral royalty regime could significantly undermine Ghana’s competitiveness in the global mining industry.
In a press statement issued on March 13, GHEITI said while the government’s new sliding-scale royalty regime is fair in principle, the continued application of the GSL risks placing an excessive fiscal burden on mining companies.
The Sliding Scale Regime
Ghana has introduced a new mineral royalty system that links royalty payments to gold price movements. This is believed to allow the country to capture greater value when commodity prices rise.
Under the new framework, royalties will range between 5% and 12%, depending on international gold prices. The lowest band of 5% applies when gold prices fall to around $1,900 per ounce, while the top band of 12% is triggered when prices reach $4,500 per ounce.
GHEITI further acknowledged that the principle behind the reform is sound. For the organization, by linking royalties to price movements, the system ensures that both the state, which is the owner of the natural resource, and investors share risks and rewards more equitably.
However, the transparency body warned that the real challenge now lies in the broader fiscal environment surrounding the mining sector.
A Case Against the 3% GSL
According to GHEITI, the continued implementation of the 3% Growth and Sustainability Levy on gross production, which is not tax-deductible, effectively increases the burden on mining companies to about 4.6% when expressed in royalty-equivalent terms.
The situation becomes more dire when applied to the new royalty regime. When this levy is combined with the new royalty structure, the total fiscal burden on gross mineral production could exceed 16%, a level GHEITI says is unprecedented among global mining fiscal regimes.
GHEITI stressed that the biggest threat to Ghana’s attractiveness as a mining investment destination is not necessarily the new royalty regime itself, but policy unpredictability.
“GHEITI wishes to point out that the biggest threat to Ghana’s investment attractiveness is not necessarily the newly prescribed mineral royalty, but fiscal predictability and certainty, which are essential for long-term planning. The sudden introduction of the Growth and Sustainability Levy (GSL) without prior consultation with industry was disruptive to corporate investment planning,” the statement noted.
He continued, “At 3% of gross production (approximately 4.6% when expressed in royalty-equivalent terms due to its non-deductibility), the continued application of the GSL alongside the new royalty regime would significantly increase the fiscal burden on gross production, raising it to over 16%, a level that is unprecedented in global mining fiscal regimes.”
The Call
GHEITI therefore believes that removing the levy would restore balance within the fiscal regime while still allowing the government to benefit from the new royalty system.
It is therefore calling on the government to immediately remove the 3% GSL to improve Ghana’s attractiveness and bring some relief to the sector.
“Government should consider, as a matter of urgency, the complete withdrawal of the GSL to reduce the fiscal burden mining companies carry as a result of the new royalty regime,” GHEITI called.
The transparency initiative also encouraged continued dialogue between the government and the mining industry to refine the design of the royalty bands, which some industry players consider overly aggressive.
