Parliament approves US$832m tax waiver on US$1.5bn project
Parliament has approved the Finance Ministry’s request for tax concession amounting to US$ 832 million on the US1.5 billion Tema Port Expansion project which is being undertaken by the Meridian Port Services (MPS) Limited.
The Tax concession is in respect of Value Added Tax (VAT), National Health Insurance Levy, Customs Duties, Corporate and Withholding Taxes, and other applicable taxes.
The Chairman of Parliament’s Finance Committee, Mr James Avedzi, who moved the motion for the approval, said the waiver was necessary to ensure that the entire credit facility sourced was available for the execution of the project.
He said the waiver was also aimed at sustaining the attractiveness of the project to the financiers (MPS) and other stakeholders and also to ensure that the government did not incur additional cost on the project.
He also mentioned that the waiver was on materials and equipment including other related taxes for the finance, design, construction, equipping and operation of the project.
The required exemptions include an exemption from corporate income tax for 10 years after date of first commercial use of the facility and a reduced corporate tax of 15 per cent after 10 years for five years.
It also includes an exemption from tax on dividend for 20 years to both resident and non-resident shareholders.
According to the Finance Committee, the Ghana Revenue Authority (GRA) had assessed the applicable taxes, duties and levies for which the exemptions are being requested.
Minority not happy
But the Minority Members in Parliament however described the deal as a bad one, adding that there were too many giveaways.
The Member of Parliament for New Juabeng North, Dr Assibey Yeboah, speaking on the floor of the house, said there was no logic in giving out over 55 per cent waiver on a project that the country would have only 30 per cent shareholding in.
He said the executive approval that came to parliament asked for US$982 million in tax concessions, almost a billion but the finance committee reduced it to US$832 million which was still too much on the higher side.
He argued that had the committee reduced the figure further down, MPS would still be satisfied and gone ahead with the project because it was all giveaways.
“MPS are investing US$1.5 billion and we are giving them US$ 832 million which means for each dollar that they invest, we give them a tax waiver of 55 cents,” he stated.
“The National Fiscal Stabilisation Levy, a levy that was brought in to stabilize the economy. Banks pay it, Telcos are paying it, and Breweries are paying it so why should we exempt MPS from paying it?” he quizzed.
“We are also exempting them from paying the NHIS levy; are their workers not going to benefit for the NHIS?”
He said this are the kind of projects that he expected the government to borrow money and undertake because it was a project that would rake in over US$ 5 billion for the country and would have paid for itself.
Legal basis and justification for the request
Commenting on the legal basis and justification for the request, the Deputy Minister for Finance, Mrs Mona Quartey, said strategic investments in excess of US$ 50 million qualified an investor to tax concessions under section 26 (4) of Act 865 and Internal Regulations issued by the Ghana Investment Promotion Centre (GIPC).
She said in mostly all jurisdictions, port projects of this magnitude were normally undertaken by the government.
She however indicated that, under this project a private partner who was mindful of the extensive capital outlay, the expected levels of efficiency in management practices and span of time to recover the investment had elected to take all risks and responsibilities of the project.
She said the tax concession was therefore to ease the effect of the investment risk and sustain the attractiveness of the project to the financiers and other major players.