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Ghana loses millions of Dollars through Transfer Pricing

  • SOURCE: | qwesa2big
  • moneyStudies conducted by the Africa Centre for Energy Policy(ACEP) and the Integrated Social Development Centre (ISODEC) reveals that Ghana is losing millions of dollars through transfer pricing and under invoicing, a situation that is contributing to the  to the current economic crises that the nation finds itself.

    According to the think tanks, Tax evasion and tax avoidance through transfer pricing, trade mis-pricing, bribery and corruption of officials in the extractive resource sectors constitute a major component of illicit financial outflows with a damaging impact on African countries ability to mobilize domestic resources to finance national development.

    The report noted that  when these practices are combined with generous tax concessions and subsidies granted to companies, the extractive resource sectors do not contribute sufficiently enough to Ghana’s  development.

    Others are over-invoicing or under pricing trade deals, transfer pricing and using offshore financial and banking centers as tax havens located outside the continent. Transfer pricing occurs when multinationals decide how much profit to allocate to different parts of the same company operating in different countries and then determine how much tax to pay to each government.

    A leading member of CEP. Mohammed Amin Adam recommended that the  Capacity of tax authorities are strongly built to help them detect such illicit acts. He added  that the multinational companies in Ghana are in for profit and would do anything to maximise their profits to the detriment of the country  he therefore urged civil societies with relevant information that can assist GRA to go after companies.

    Besides, the report noted that there is a need to strengthen the country’s tax and legal regime to curb the challenges of illicit financial outflows, studies show that outflows from Africa are linked to the secrecy around mining contracts and tax regimes, system for valuing the resources, capital and operational costs.  Secrecy surrounding this information contributes to the leakages and transparency through full disclosure of contracts would be the first order of action to block them.

    The report urged Government to mandate companies bidding for concessions or license to fully and publicly disclose their beneficial ownership of contracts, with strong penalties for non-compliance.

    Like Norway and the US, African countries require stiffer sanctions for abuse of inter-firm pricing and introduce legislation on transfer pricing requiring intra-company transactions to be conducted strictly on an arms-length basis. This means that all transactions within a company should be conducted on the same terms that would apply as if they were carried out between companies.

    It recommended that African governments  strive  and  build the human, financial and technical capacity to track transfer pricing and should establish specialized transfer pricing units to monitor profitability reported prices and reporting on profits in other jurisdictions.

    African government should support public dialogue on how natural resources can contribute to development and stability.  Extractives should be included in the discourse on domestic resource mobilization.

    Source: Kwabena Adu Koranteng/ New Crusading Guide

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