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PSI holds workshop on Tax Justice in Ghana

09 August 2018
PSI affiliates converged in Ghana, on July 27-28, for a two-day meeting sponsored by the Friedrich-Ebert-Stiftung (FES) on Tax Justice under the theme “Illicit Financial Flows (IFFs) and the needed Revenue for Public Services Development”. Before Ghana, Tanzania, Nigeria and Kenya held similar meetings; while a final conference has been scheduled to take place in Ethiopia in September.

The meeting sought to provide an avenue for sharing and discussing some of the domestic resource mobilization constraints and opportunities in Ghana; the threats of privatization to quality public service delivery and how much the country loses to tax incentives and other waivers to multinational companies. This exercise sought to help the country raise more tax revenue to fulfill the government's agenda of a “Ghana Beyond Aid.”

Through the processes of stakeholder analysis and power mapping, participants identified their key and most powerful stakeholders in order to develop a winning campaign strategy.

Participants were drawn from the Public Utility Workers Union (PUWU), Public Services Workers Union (PSWU), Ghana Registered Nurses Association (GRNA), Civil and Local Government Staff Association of Ghana (CLOGSAG), UNICOF, Health Services Workers Union (HSWU), Local Government Workers Union (LGWU), and the Federation of Universities Senior Staff Association of Ghana (FUSAG).

The rest were the Trade Unions Congress of Ghana (TUC), CSOs Coalition on Tax Justice, and the FES.

This meeting is part of a series of Tax Justice Meetings being undertaken by PSI in some selected African countries. Already, Tanzania, Nigeria, Kenya, and Ghana have held their meetings while a final conference has been scheduled to take place in Ethiopia in September.

The meeting noted that:

  1. In the Ghana/Exxonmobil draft agreement just like previous ones, export and import duties are likely to be waived as seen in the draft agreement we have cited. It further violates section 67(6) of the income Tax Law (Act 896) in the extension of carried forward losses from 5 years to 10 years.
  2. Irrespective of the fact that the country has subscribed to the Extractive Industry Transparency Initiative (EITI), there are confidentiality provisions in the agreement that limits the depth and scope of public discussion and debate of the contract.
  3. Public Private Partnerships (PPPs) projects are a burden and a drain to the public purse and limits access to quality public services. A case in point is the Ghana Water Company Limited (GWCL) agreement with Messrs Befessa to build a desalination plant. The agreement has indebted the GWCL, running a net negative monthly cashflow of about GHC6.02M.
  4. PPPs provides room for tax avoidance through offshore ownership and allows the use of government money to guarantee private monopoly.
  5. Despite the various engagements between Trade Unions and the government of Ghana on the Electricity Company of Ghana (ECG) concession, there are still grave and problematic tax provisions that only serve the interest of the concessioner and not the government or the people of Ghana.
  6. In the ECG concession deal, the company, including persons and entities working on behalf of the company in connection with the Millennium Challenge Compact II (MCCII) program, is exempted from all forms of taxes, duties and tariffs, on profits, income and any activity performed in connection with the program. The company shall retrieve from higher pricing of electricity, any corporate tax paid to the government of Ghana.
  7. The ECG concession agreement has created a private monopoly with sovereign guarantee. The firm will not fail to reward its shareholders at the expense of the tax payer.
  8. The World Bank reports that Ghana loses about 5% of GDP to tax incentives which is more than 2 billion dollars. The free zones area, for example, gives 100% tax exemptions to companies on income taxes on profits for 10 years which shall not exceed 15 per cent thereafter.
  9. Double taxation agreements hamper Ghana’s ability to raise revenue from multinational companies present in Ghana. It is however worrying that the country continues to sign double taxation treaties with countries, including a recent agreement signed with tax havens such as Ireland, Mauritius, and Singapore.

Following these, participants at the meeting outlined some suggestions to help the government of Ghana achieve its targets and avoid tax evasions:

  1. We urge the government of Ghana to renegotiate the draft Exxonmobil deal to ensure that the country is able to generate more revenue than what the deal provides in its current state.
  2. Public Private Partnerships should not be government’s response to the provision of public services. Government should focus on raising more revenue by creating formal sector employment, exploring improved wealth and property taxes and remove all forms of harmful tax incentives.
  3. The government should set in place and adhere to mechanisms that ensure transparency and accountability of its tax treaties negotiations through increased public and parliamentary scrutiny of the negotiation process, including the outcome of the negotiations.
  4. The government should proceed swiftly to introduce a beneficial ownership register which is comprehensive, up-to-date, with verified information and that is available to the public for free.
  5. That labour and civil societies will have to be resolute in their commitment to expose the weakness or the failure of the model by keeping an eye on the possible monitoring arrangements that will be put in place by ECG & PDSG in accordance with section 2.23 of the agreement, which is a condition precedent.
  6. The Ghanaian government should follow up its commitments in the 2018 Budget statement on addressing harmful tax incentives with swift, concrete and robust action.
  7. Ghana should publish on an annual basis which companies are benefiting from statutory and discretionary tax incentives, how much each company is benefiting from those incentives and the overall cost of each incentive.
  8. All incentives should be publicly debated in the Ghanaian parliament before being granted and should not be discretionary to individual companies.
  9. Ghana should review its current tax treaties to ensure that these are not a source of tax losses and consider renegotiating those tax treaties that are no longer fit for purpose. Ghana should also not ratify tax treaties with tax havens such as Ireland and Mauritius.

In the end, it was agreed that effective domestic resource mobilization and continuous engagements between the trade unions, CSOs and the government is the best way of improving on the livelihood of workers and citizens through the provision of quality public services.

African Women Tax Justice Conference

The next tax justice activity, The Fight for African Women Tax Justice Conference, will take place in Addis Ababa, Ethiopia from September 5-6, 2018 with participants to be drawn from Ghana, Nigeria, Kenya, Tanzania, Tunisia, Uganda, Swaziland and South Africa.

 

In Russian (Pусский)

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