By Issah Mohammed
Koforidua (E/R), June 17, GNA – The Natural Resource Governance Institute (NRGI) has urged Parliament to demand safeguards against tax avoidance in the yet to be ratified lithium agreement between Ghana and Barari DV, a subsidiary of Atlantic Lithium Limited.
According to the international Civil Society Organisation (CSO), though government had negotiated a good stake in the lithium mining project, it could be shortchanged if certain protective measures were not included in the agreement.
“The weakness of the agreement appears to be the lack of protection against tax avoidance,” said Thomas Scurfield, a NRGI Senior Economic Analyst for Africa.
At a media engagement in Koforidua on Tuesday, he said underpricing of sales was a risk that could lead to transfer mispricing, especially in the case where Barari DV had a partner with a 40 per cent stake, who was also allowed to buy 50 per cent of the mining produce.
In effect, he said the mining firm could decide to sell its lithium at a lower price to under declare its sales and profits and, ultimately, its financial obligations to the Government.
To rectify the situation, he called for the inclusion of benchmark pricing clauses into the agreement to curb the practice.
Mr Scurfield identified excessive interest deduction as a means by which government could lose revenue from the mining of lithium.
There was the possibility of tax avoidance through a scenario where the firm contract loans at a higher interest rate from partners, which would be deducted (interest rate) from profit at the end of the accounting period.
He urged parliament to introduce interest deduction limits into the agreement to guarantee sustainable tax return.
The NRGI, among other things, also proposed the introduction of clear dividends distribution rules in shareholder agreements to prevent underpayment of dividends and the non-dilution of equity stake clauses to protect government’s stakes from reducing when new shareholders came on board.
Atlantic Lithium limited, a lithium exploration and development company based in Australia, developed the Ewoyaa lithium project, which is located approximately 100km south-west of Ghana’s capital city, Accra.
The project area covers two contiguous licences: the Mankessim (RL 3/55) and Mankessim South (PL3/109).
Expected to be the first lithium-producing mine in Ghana, the project is focused on exploiting the Ewoyaa, Abonko and Kaampakrom lithium spodumene pegmatite deposits in western Ghana.
Atlantic Lithium completed a pre-feasibility study (PFS) for the project in September 2022.
In June 2023, the definitive feasibility study (DFS) was announced, outlining a 2.7 million tonnes per annum (mtpa) spodumene mining operation over 12 years of the mine lifespan.
GNA
Edited by Agnes Boye-Doe