If parliament approves it, the US$1.5billion Tema Port Expansion Project will enjoy a tax waiver that is almost two-thirds the project cost.
Government and the minority in parliament are haggling over the figures, with the minority calling for more information on the deal before it supports the generous tax waiver of US$832,000,000 the Finance Committee has recommended to be approved.
The Finance Ministry, which made the request for the tax waiver in favour of the concessionaire – Meridian Port Services Limited – had asked for US$982,000,000. to be waived in respect of Value Added Tax, NHIL, Customs Duties, Corporate and Withholding Taxes and other applicable taxes.
The waiver is in respect of materials and equipment “including other related taxes for the finance, design, construction, equipping and operation of the Tema Port Expansion Project”.
The required exemptions, the Finance Committee’s report indicates, include “an exemption from corporate income tax for ten years after date of first commercial use of the facility, and a reduced corporate tax of 15% after ten years for five years as well an exemption from tax on dividend for 20 years for both resident and non-resident shareholders”.
The tax waiver will leave the state with a total amount of US$5.71billion consisting of tax and non-tax revenue from the project’s operations.
Out of this amount 33% will be direct savings accruing to government of Ghana, with 18% and 7% to be collected by Ghana Revenue Authority and SSNIT respectively. Another 42% will accrue to the GPHA in the form of royalties and dividends.
Presenting the Finance Committee’s report on the request for the tax waiver, its Chairman, James Avedzi, explained that the tax concession is to ease effects of the investment risk and sustain the project’s attractiveness to the financiers and other major players.
The Finance Ministry has justified the tax waiver by indicating that strategic investments in excess of US$50million qualify an investor to tax concessions under Section 26(4) of Act 865 and Internal Regulations issued by the Ghana Investment Promotion Centre.
But some minority members of parliament feel the amounts involved are too much. Even so, they believe parliament, which has to approve the tax waiver, was not privy to the agreement “on time”.
The minority says until the Ghana Ports and Harbours Authority (GPHA) goes through the project costs and design with the Roads and Transport Committee, it cannot support approval of a US$1billion tax concession.
Dr. Anthony Akoto Osei, who is on the Finance Committee, said the minority is yet to fully understand the tax concession’s details, hence its decision to turn it down.
“I am being asked to approve an almost-US$1billion tax waiver whose costs details I don’t have any information about,” he said.
“We are not the proper committee to look at the details; it is the Roads and Transport Committee. So we advised GPHA go through the appropriate committee with the design and project cost, so it can inform us that road expansions like the motorway is reasonable – so when we are giving a tax waiver then we can have a basis. I don’t have the expertise to interrogate some of these things. So that’s all we are asking them to do.”
Meridian Port Services Limited has said it is financing the project with long-term loans aggregating approximately US$1.040million and the balance of US$520million through equity.
To secure funding, the company has mandated the International Finance Corporation of the World Bank Group to arrange and structure the project’s financing.
The concession agreement between the GPHA and Meridian Port Services Limited obliges the latter to design, engineer, finance, construct and operate a new port facility in Tema for a period of twenty-five years after the date of first commercial use.
According to the Committee’s report, Tema Port – which has developed in phases since 1964 -has attained its maximum operational capacity.
The report further states that the port had exceeded its 500,000 Twenty Foot Equivalent Unit (TEUs) target since 2008.
Cargo traffic at the port has grown steadily from 9.25million metric tonnes in 2010 to 15.87million metric tonnes in 2014, a growth of about 71.5 percent over the five-year period.
Trade volumes associated with expansion in economic activity in Ghana and other landlocked neighbouring countries that rely on the Tema Port have experienced steady growth in the last five years, the reports states.
The shareholding structure of the MPS is GPHA 30 percent and MPS 70 percent.
Source: B & FT