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Ghana may miss out on as a lot as GH¢400 million in capital features tax following the sale earlier this yr of MTN’s funding in a cell phone tower enterprise within the nation.

Ghana could not be capable of tax the sale as a result of it happened offshore. MTN bought its shares in an organization within the tax haven of the Netherlands, which owns the towers.

MTN’s newest monetary outcomes, revealed final month, say that its revenue of 4.8 billion South African rand (GH¢1.6 billion) from the sale is “non-taxable”.

MTN’s monetary outcomes didn’t say why it thinks Ghana can not tax its large revenue. The South African telecoms large didn’t reply to requests for a proof.

However with capital features taxed at 25 per cent, it means the nation may lose out on a income windfall of greater than GH¢400 million.

The potential of lacking out on such an enormous sum comes as Ghana has been compelled by the outbreak of the worldwide COVID-19 pandemic to revise its progress downward, making each tax pesewa rely to fill within the hole. Progress was revised from 6.8 per cent to simply 0.9 per cent.

Nevertheless, a senior supply on the Ghana Income Authority (GRA) advised Ghana Enterprise Information that regardless of what MTN says, the revenue could in actual fact be taxable in Ghana. “We think about each sale as taxable,” the supply mentioned, including that the GRA would examine the transaction “to make sure that income shouldn’t be misplaced to the state.”

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MTN Ghana is the most important telecoms operator within the nation with 67.7 per cent knowledge market share and 57.07 per cent voice market share.

MTN Ghana rents cell phone towers from the Dutch firm, Ghana Tower Interco BV. The Dutch firm was 49 per cent owned by MTN however following this yr’s divestment, it now belongs solely to the US-based American Tower Company. ATC has accomplished an identical Dutch-based deal to amass MTN’s telephone tower funding in Uganda.

However with capital features taxed at 25 per cent, it means the nation may lose out on a income windfall of greater than GH¢400 million.

Multinationals generally personal their investments in international locations like Ghana by way of holding corporations in tax havens, with the Netherlands being a selected favorite.

This type of association highlights a thorny drawback for international locations like Ghana which wish to tax the income that multinationals make from promoting their investments.

When the company sells the funding, it may well attempt to keep away from tax within the nation the place the funding is situated by promoting the shares of the tax-haven firm as a substitute, and reserving the revenue within the tax haven.

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This follow, identified technically as an “offshore oblique switch”, shouldn’t be unlawful. It depends on exploiting the wording of nationwide tax legal guidelines and bilateral tax treaties between international locations.

The World Financial institution and Worldwide Financial Fund level out that asset gross sales by way of tax havens are “a priority in lots of creating international locations, magnified by the income challenges that governments world wide face as a consequence of the COVID-19 disaster.”

Policymakers world wide are below rising stress to curb this follow due to its large income price. Final month (July), a report by Finance Uncovered and Oxfam Novib confirmed that in simply six offers, creating international locations missed out on $2.2 billion in capital features tax.

Nevertheless, tax analysts mentioned that Ghana’s tax treaty with the Netherlands ought to enable the GRA to tax this kind of transaction.

“Taking a look at this situation, MTN will likely be handled as having realized an asset because of the sale of the shares. The acquire is computed as the surplus of the consideration acquired for the shares over the price of the shares on the time of realization. Underneath Article 13 (5) of the double taxation settlement with The Netherlands, the features turn into taxable solely in Ghana,” a tax skilled in Accra, advised Ghana Enterprise Information.

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Commenting, Kwesi W. Obeng, Regional Programme Advisor Inequality – West Africa, Oxfam Worldwide, mentioned: “Offshore Oblique Switch (OIT), may be very aggressive tax avoidance scheme utilized by multinational corporations to keep away from paying truthful taxes particularly in creating international locations akin to Ghana. OIT robs the federal government of hundreds of thousands of important tax {dollars}, thus successfully contributing to the rising ranges of poverty and inequality within the nation.

OIT is a method that includes complicated company constructions together with the institution of middleman entities in tax havens and secrecy jurisdictions and utilized by largely multinational corporations is a significant drawback in Ghana. Regardless of the businesses arranging their company constructions and transactions to keep away from Capital Beneficial properties Tax by OIT, international locations like Ghana do have choices to successfully make sure the taxation of capital features.”

By Emmanuel Ok. Dogbevi & Diarmid O’sullivan

This story is a joint investigation by Ghana Enterprise Information and Finance Uncovered, a UK-based journalism organisation.

Copyright ©2020 by Inventive Imaginations Publicity
All rights reserved. This text or any portion thereof might not be reproduced or utilized in any method in any respect with out the specific written permission of the writer aside from using transient quotations in evaluations.

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