The Africa Centre for Energy Policy (ACEP) has said Ghana is a sanctuary for multinational oil companies to evade tax through debt loading practices.
The practice involves foreign companies lending to their subsidiaries at higher prices in order to maximise group profit while reducing their tax base.
According to ACEP, the Petroleum Exploration and Production Act, which was recently passed by parliament, attempted to solve the problem by relying on the Income Tax law. However, he added that there were loopholes in the tax law, which made it possible for the oil companies to reduce their tax obligations to the state.
Speaking to Class Business, the Executive Director of ACEP, Dr Mohammed Amin Adam, said the country must find a solution to the problem.
“The difficulty I have with both the [Petroleum Exploration and Production] Act and the Internal Revenue Act, has to do with withholding tax on interest on the loans which we provide for at eight per cent. So companies can still do debt loading in spite of this provision because what they do is this: if they are operating in a country that has double tax treaty with Ghana and the withholding tax on cross-border loans is higher, what they do is to lend to countries where the tax is lower,” he revealed.
“So Ghana has a double tax treaty agreement with a number of countries – UK, France, Italy etc., and the withholding tax on the interest on loans, they are quite higher than that of Ghana … and most of the companies … are either Eni…or Tullow Oil from the UK. Or if you have Total Oil from France, why will they not rent to their subsidiaries in Ghana where the withholding tax on the interest that Ghana will pay to them is eight per cent instead of lending to corporations within France, within the UK, or in Italy? And so Ghana is still a convenient place for debt loan and this needs to be addressed.”
Source: ClassFMonline.
