Koforidua: 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 Ghana News Agency, though the 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 highlighted that underpricing of sales was a risk that could lead to transfer mispricing, especially since Barari DV had a partner with a 40 percent stake who was also allowed to buy 50 percent of the mining produce. This could result in the mining firm selling its lithium at a lower price to under declare its sales and profits, ultimately impacting its financial obligations to the Government.
To address this, Mr. Scurfield called for the inclusion of benchmark pricing clauses into the agreement to curb such practices. He also identified excessive interest deduction as a means by which the government could lose revenue from the mining of lithium. There was a possibility of tax avoidance through scenarios where the firm could contract loans at a higher interest rate from partners, which would be deducted from profits at the end of the accounting period.
He urged Parliament to introduce interest deduction limits into the agreement to ensure sustainable tax returns. The NRGI also proposed the introduction of clear dividends distribution rules in shareholder agreements to prevent underpayment of dividends and the inclusion of non-dilution of equity stake clauses to protect the 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, 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.
