Chamber of Mines Warns Against Mineral Royalty Reform Rush

The Ghana Chamber of Mines has raised concerns about a proposed new mineral royalty regime, warning it could harm the country’s mining sector competitiveness and long-term sustainability.

In a position paper, the Chamber stated that while it supports the principle of a sliding-scale royalty system, the proposed structure and rates risk placing Ghana among the highest-taxed mining jurisdictions globally. This, they argue, could deter investment, impact job creation, and ultimately reduce future government revenue.

The Chamber highlighted that Ghana already has a robust mining fiscal framework, collecting revenue from various sources including mineral royalties, the Growth and Sustainability Levy (GSL), corporate income tax, and dividends. They cautioned that taxes based on gross revenue, like royalties and the GSL, are less desirable as they apply regardless of a mining company’s profitability.

“Profit-based taxes are more progressive and allow the state and investors to share risk more equitably,” the Chamber argued. They noted that the state currently captures between 45 and 60 per cent of mining company profits, a figure already high compared to other mining nations.

The government’s plan is to replace the current flat 5 per cent royalty on gold with a price-linked sliding scale. The Chamber acknowledges the potential benefits of such a system in capturing revenue during commodity price surges but stresses the importance of carefully considered price bands and rates, and whether royalties should be based on gross revenue or profit margins.

They point out that combining the proposed royalty structure with the existing GSL could push the effective royalty rate above 10 per cent of gross revenue, making Ghana less attractive than other African and international mining destinations. A comparative study cited showed countries like South Africa, Chile, Peru, and Canada utilize hybrid or profit-based royalty systems.

The Chamber warned that significantly increasing royalties could force some mines, particularly mid-tier and mature operations, to become economically unviable. This could lead to reduced investment, increased cut-off grades, job losses, and decreased community development spending.

Using a model of a mid-sized gold mine, the Chamber projected that the average effective tax rate could jump from around 51 per cent now, to over 60 per cent in a strong gold price market, and nearly 70 per cent if prices fall. They cautioned against making permanent fiscal changes based on short-term gold price fluctuations.

Ing Dr Ken Ashigbey, speaking on behalf of the Chamber, urged the government to postpone laying the Legislative Instrument (LI) and instead engage in broader consultations with industry stakeholders. “We need a balanced framework that secures sustainable revenue for the state while allowing the sector to grow,” he said.

The Chamber has proposed an alternative sliding-scale model with more moderate rates and a profit-based contribution to a development fund during periods of exceptionally high gold prices. They also recommended abolishing the Growth and Sustainability Levy to reduce the overall tax burden on mining operations.

The ultimate goal, the Chamber said, is to optimize long-term, sustainable revenue for the government while fostering an environment where the mining industry can invest, expand, create jobs, and contribute to the national economy and local communities.

As of press time, the government is yet to respond to the Chamber’s concerns. The debate unfolds as the government seeks new ways to bolster domestic revenue mobilization and maximize benefits from Ghana’s natural resources.

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