If today they are being cited for not honoring their previous taxes, the question that jumps to mind is whether the GRA is now looking back to redefine how Ghana’s tax laws are applied; This then clearly shows that the tax agency’s approach to the issue is one-sided.
There is also a question of fairness in this whole back-tax controversy if the scope and nature of the audit process is questioned. It seems that the demands are being made only on the big multinationals who cough up the several million dollars that the GRA wants to withdraw. In any case, one would expect this rule to be applied to all taxpayers, be they multinational or local companies.
It must be said that this tax misunderstanding does not bode well for short-term investments because certainty about a country’s tax laws and how they are applied are important criteria that investors consider in pushing their capital into the economy.
How Tullow’s call for international intervention could affect Ghana’s IMF bailout
After MTN’s tax assessments were withdrawn after a South African government official expressed displeasure, Tullow applied for international arbitration in London. In the case of GRA v Tullow the process of international arbitration of tax disputes is long and expensive.
However, this is definitely a process anchored in law. Indeed, it is within Tullow’s rights to protect its interests the way it has chosen to go but isn’t there a better way that does not damage Ghana’s investor attractiveness?
Ghanaians should be concerned about the damage this intervention could do to Ghana’s quest to secure a US$3 billion bailout from the International Monetary Fund.
We all wait to see the impact of international intervention unfold on Ghana’s investor image but is it a risk worth taking when we are at the door of the IMF for a bailout?
It should be emphasized that there may be a geopolitical twist to this gross misunderstanding considering the influence that multinational corporations have on their governments. Indeed, no government wants to see its multinational being mistreated abroad, not to mention the geopolitical ramifications of an expected protracted mediation process on Ghana’s bailout negotiations with the IMF later on.
For example, no one gets an IMF program without the push or vote of the United States, the fund’s largest shareholder. Ghana finds itself in a dire economic situation that requires pulling some geopolitical strings to fast-track the approval of the bailout program in an extraordinarily short period of time.
Given this context, any act of posting an unfavorable geopolitical narrative about Ghana could affect how smoothly the agreement is pulled through to ratification.
The need for multi-stakeholder decision-making to meet mutual interests
Admittedly, there has been a lot of talk about the fact that the state is not getting the desired tax revenue from its most profitable sectors, especially extractives and telecoms, but the GRA tax demands from foreign firms in the past few weeks have surprised many. They are legal claims or actions of a desperate taxpayer.
Ideally, if state tax collectors want to reinterpret and apply tax laws on big companies to get the right level of taxes for the government, it will have to come out clearly to engage these private businesses in the future.
There is a need for inclusive engagement between GRA, respective sector ministries—Finance, Energy and Communications, and affected companies to find a mutually beneficial solution to the back-tax confusion.
Investment goes to places where there is certainty about rules and regulations, including tax rules, and therefore it is suitable for the government and its investment promotion agencies – the Ghana Investment Promotion Centre, the Ghana Free Zones Authority and other businesses. Attracting investment inflows to Ghana should involve finding a multi-stakeholder solution to the ongoing tax disputes.
