Making Ghana a safe haven for investments should be the top-most priority of a nation that is currently going through dire social and economic distress. To achieve this, state actors—especially those whose works are directly linked to the attainment of this goal are required to provide a favourable environment and that feel-at-home factor for investors, especially for foreigners or multinationals operating within our jurisdiction.
Several factors could be considered in assessing the readiness of any nation to attract investments. Aside the juicy enticement packages, working infrastructure, stable democracy and how the market is secured for investments, one other key factor is the tax administration system and how they are applied in accordance with prescribed contractual obligations.
Every investor or business will inject capital in any economy with the hope of making the right returns after honouring their tax obligations and it will therefore be awkward for these investors to feel that they are being shortchanged on their profits.
A senior economic analyst and tax expert with the Natural Resource Governance Institute, Alex Ampaabeng, sharing his thoughts on the current impasse between the GRA and four multinational firms, urged the need for stability in Ghana’s tax administration process.
“Companies, whether it’s foreign direct investments or re-investing, want certainty around the fiscal regime in any jurisdiction that they want to pump their capital. If the country goes about changing the fiscal rules as and when to suit their revenue needs it does not augur well for the corporate environment,” he said.
He added: “Companies invest in any country for profit because they may have identified an opportunity to maximize the wealth of their shareholders.”
After being cited by the Ghana Revenue Authority for alleged tax infractions, Tullow Ghana, a multinational firm operating in Ghana’s oil enclave, has filed for international arbitration in London on the grounds that the GRA’s demand and the approach it chose were a breach of rights under the Petroleum Agreements.
According to Tullow, the state tax collector did not respect the sanctity of the contract regarding its tax obligations as a dominant player in Ghana’s oil sector, a claim that raises some serious concerns about the precedent that is being set by the GRA in its tax assessments of these multinationals.
It is globally accepted that once parties duly enter a contract, they must honor their obligations under that contract. It will therefore be wrong for one party to unilaterally alter contractual terms even where there is real apprehension of whatever nature on either party.
In this vein, it is safe to say that the GRA seems to be making a mockery of international contract law with its tax demands to foreign companies like Tullow and a host of other foreign firms operating in the country.
In the case of Tullow, its operations are governed by the Petroleum Agreements. It is true that the Petroleum Agreements are governed by Ghanaian law but only insofar as Ghanaian law is consistent with international law.
What this basically means is that if a rule of Ghanaian law is inconsistent with a rule of international law, then: (i) the relevant rule of international law will prevail and (ii) the rule of Ghanaian law will not apply and must be disregarded.
For example, if Ghana’s Parliament enacted a new law which conflicted with or modified the Government’s obligations under the Petroleum Agreements, then That law would be inconsistent with the rules of international law that require Ghana to adhere to its contractual obligations and to not invoke rules of domestic law to avoid international obligations.
Any such Ghanaian law would therefore be disregarded by an international arbitral tribunal. Is the GRA, with its tax assessments that don’t appear to be in line with the PA, sure of winning at an International Arbitration process?
By passing such a law, the Government of Ghana would also be in breach of the stabilization provisions in the Petroleum Agreements potentially giving rise to contractual and international law based claims against the Government.
Commenting on the impending legal tussle between GRA and Tullow, Mr. Ampaabeng recommended dialoguing over litigation, considering the mixed picture that the latter will project about the country.
“Dialogue, to me, is the way forward because these multinationals are partners in nation-building. It’s about tax and situations like these are expected, but we do not need strained relations between the GRA and the business community.
Also whatever actions that are taken against these multinationals will go global and we don’t want to create that picture of Ghana having a hostile environment for business. That’s not a good assurance for investors seeking to do business in the country,” he further indicated.
Undoubtedly, the GRA has every right to call for audit of tax filings that it receives from any business, but how the GRA handles such process, especially those with binding contractual obligations for both parties, could undermine the nation’s aspiration of becoming the investments hub of the sub-region.
Ghana must now, even in its precarious economic situation, ‘walk the talk’ of its ‘beacon of democracy and rule of law’ positioning in Africa by settling these tax matters with foreign investors reasonably on the basis of mutual respect for the sanctity of contracts.
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