BY EDMUND SMITH-ASANTE
“Our conservative projections show that the
country has lost close to US$70 million in potential tax revenue in the last
two years, a situation we find inexcusable and which in our view flies in the
face of the desperate attempts being made by government to raise additional tax
revenue, including the imposition of taxes on some agricultural implements,
some categories of imported condoms and upward adjustment in fees and levies of
government’s departments and agencies,” the platform said in a statement signed
by its Chair Dr Steve Manteaw and issued recently.
Ghana has within the spate of two years lost
about US$ 70 million that could have accrued to the country, in view of the
failure to amend or harmonise its petroleum income tax law (PITL), the Civil
Society Platform on Oil and Gas, an amalgamation of NGOs in oil and gas has
stated.
According to the platform, the lack of action on
a planned amendment or harmonisation of the Petroleum Income Tax Law with the
general income tax provisions is costing Ghana millions of dollars in potential
tax revenue, even as the government explores innovative ways of raising badly
needed financial resources to finance its 2013 budget.
Stating that the failure to amend the PITL and
the resultant loss of revenue amounts to criminal negligence on the part of the
Ministry of Finance and possibly the Attorney General’s Department, the
platform has made three demands on the Ghana Government.
Its demands are that an urgent bi-partisan parliamentary inquiry be
instituted to look into the reasons for the failure to amend the PITL bill and
to recommend prosecution of any person found culpable “for causing this massive
financial loss to the state.”
Also, that there is an immediate search,
retrieval and passage of the PITL amendment bill under a certificate of urgency
to prevent further loss of potential tax revenue in future transactions.
“In this connection we wish to draw attention to
a major flaw inherent in Clause 39 Section 4 of the Petroleum Income Tax Law,
which provides that “Nothing in the Additional Profit Tax Law, 1985 (P.N.D.C.L.
122) or the Capital Gained Tax Decree, 1975 (N.R.C.D. 347) shall apply to
petroleum operations here-under.”
Though the Capital Gained Tax Decree has been
repealed, the Civil Society Platform on Oil and Gas considers that this
provision can be interpreted to mean that the intent of the PITL is indeed to
exempt actors in the petroleum sector from Capital Gained Tax, the statement
advanced.
The platform alternatively proposed the repeal of the PITL to pave way
for the application of the provisions under the general income tax law, which
includes Capital Gained Tax.
“We make these
demands, aware that, in so far as the PITL is referred to in the petroleum
agreements of the companies, the repeal of the Act may trigger agitations for
re-negotiation of aspects of the petroleum agreements of some companies, but
that is likely to be a small price we will be paying compared to how much we
have already lost in potential revenue, and how much we stand to lose in future
transactions if the status quo is maintained,” the civil society group said.
Recalling a controversial deal the EO Group
concluded with Tullow Oil in July 2011 for the transfer of the former’s 3.5
percentage stake in Kosmos Energy to the latter, the platform said in the end
the deal was ratified by Government allegedly without consulting with the A-G
who, according to Article 88 (1) of the 1992 Constitution of Ghana, is
"the principal legal adviser to the Government."
According to the platform, ratification of the
sale transaction sparked a new controversy as to whether or not Ghana can,
legally speaking, tax the transaction, worth some US $305 million, but in spite
of assurances by the Ministries of Energy, and Finance and Economic Planning
that Ghana will apply a 10 per cent Capital Gained Tax on the transaction,
amounting to US $30.5 million, the country has been unable to do that and
therefore appears to have lost the potential tax revenue.
It further expressed worry that Government has
largely ignored expert opinion on the subject, to the effect that even though
the General Income Tax Act (Act 592) generally imposes and mandates the payment
of 10 per cent Capital Gained Tax on the trading of capital assets, the
existing Petroleum Income Tax Law does not, complicating any attempts to tax
the transaction.
“This opinion has been against the backdrop that,
in law, specific laws (like the Petroleum Income Tax Law) takes precedence over
general laws, like Act 592, which currently is deemed inconsistent with the
Petroleum Income Tax Law,” the platform stated.
It expressed disappointed that Government has
since its dispute over the EO Group sale done nothing about the lacuna in the
Petroleum Income Tax Law, thus making it possible for Sabre Oil to also
potentially get away with an undisclosed sum in receipts for its sale of a 4.05
per cent share in Tullow to South Africa’s national oil company, PetroSA.
“Unconfirmed reports say the deal was worth
something in excess of US$365 million, meaning Ghana must have lost at least US
$36.5 million. Combined with the revenue lost in the EO Group-Tullow
transaction Ghana is losing approximately US $67 million for the lack of action
on the PITL amendment bill,” the Civil Society Platform on Oil and Gas opines.
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