Ghana loses over £74m in two years due to tax injustice – Action Aid
Ghana lost about 74 million pounds between 2005 and 2007 from the European Union and the United States of America as a result of their Multinational Enterprises engaging in mis-pricing in order to maximize profit.
Mr Emmanuel Budu Addo, Head of Finance at Action Aid, a non governmental organization, said a lot of tax revenue was lost to the nation because of mis-pricing by multinationals since such companies tried to shift their profit from one country to another.
Mis-Pricing is an act where enterprise tags products with the wrong prices in order to enjoy a lot of tax.
Mr Budu Addo, who was speaking at a workshop jointly organized by Ghana Integrity Initiative, Christian Aid and Action Aid on Tax Justice, said even though mis-pricing and transfer pricing were not illegal they were also not ethical.
He said that Ghana’s tax loss to SAB Miller, a brewery, whose subsidiary is the Accra Brewery, was estimated at $2.2 million per annum and noted that usually the multinational enterprises transferred profit from one tax jurisdiction to another country where taxes were lower to avoid double taxation.
Mr Addo noted that mis-pricing and transfer pricing contributed to loss of revenue, which in turn hampered economic development and poverty alleviation efforts of governments.
Transfer pricing occurs when companies are part of the same multinational group trade with each other. For example when one company in a group owns a brand and another pays it license fees to use that brand, the groups accountant have to decide what price they should pay each other.
He said such acts also resulted in tax injustices and suppresses the development of local companies.
Mr Addo referring to a report titled: “Looting Africa: some facts and figures,” said Ghana could double its revenue by tackling organized tax avoidance.
Mr Vitus Azeem, Executive Director of Ghana Integrity Initiative, said enforcement of tax laws in Ghana was a serious problem that needed to be looked at.
“If we explore all our revenue sources we should be able to drastically reduce our dependence on donor support,” he noted.