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Wed, Sep

BIG BUSINESS BLEEDS GHANA: NDC TURNED A BLIND EYE TO TULLOW AND OTHERS UNDERPAYING TAXES

Business & Economy

Ghana’s working relations with multinational oil and mining companies have been thrown into doubt by revelations of the extent to which some of the largest investors in our economy have been underpaying taxes owed to the Ghanaian exchequer.

Ghana’s working relations with multinational oil and mining companies have been thrown into doubt by revelations of the extent to which some of the largest investors in our economy have been underpaying taxes owed to the Ghanaian exchequer.

A recent audit of taxes from the four partners in the pioneer Jubilee oilfield between 2011 and 2015 paints a picture of poor accountability by major players in our economy and inadequate monitoring by Ghana’s tax-collecting agencies of business conducted by such companies.

Findings of the audit by the Ghana Revenue Authority show that Tullow Oil, chief operator in the Jubilee project, underpaid taxes by $74 million over the period. The problem did not come to light earlier because, under the law, the oil companies assess their own liability and pay accordingly. Unsurprisingly, their self-assessments did not reflect the full taxes due.

Under duress

The other partners in the Jubilee field are Anadarko, Kosmos Energy and Petro SA. Presented with evidence of underpayment after the audit was completed in February 2016, and then pressured by the Ministry of Finance under Ken Ofori-Atta, these three companies have settled the taxes outstanding.

However, Tullow Oil has paid only $64m out of what it owes. It has made the payments in instalments, and only under duress from the government in the period since the Akufo-Addo-led government took office. There is still $10m outstanding.

Tullow faces separate accusations of using its dominant position in Ghana’s oil industry to act solely in its own interests. A high court in London this week ordered the firm to pay $254m to Seadrill, a company that owns and leases drilling rigs, for wrongfully terminating a contract in Ghana.

Seadrill’s West Leo rig was being used for exploration work in the Tullow-owned Tweneboa Enyenra Ntomme (TEN) oil and gas field off the coast of the Western Region. The disagreement over use of the equipment followed a government order for all activity on the field to cease pending resolution of the Ghana-Côte d’Ivoire maritime dispute, which covered the TEN area.

In December 2016, Tullow cancelled the contract for the West Leo rig, citing “force majeure”, or unforeseen circumstances that made the project no longer viable. Seadrill argued that the equipment could have been used for drilling on other Tullow operations in the vicinity.

Adequate returns

Not only do the oil and mining companies have a free hand in how they operate and account for their business, but there has been little pressure on them to make adequate returns to the government and people of Ghana for the resources they exploit.

Indeed, over the eight years of National Democratic Congress governments led by John Evans Atta Mills and John Mahama, the government of Ghana seemed happy to take whatever the oil companies chose to offer.

A source close to the Ministry of Finance told the Daily Statesman: “What now the new government is going to do is to be rigorous in its review with the extractive industries. It would be good if these companies honoured their tax obligations. If not, they will be dealt with according to the laws of Ghana.”

The situation with gold mining is even worse. An inside source with knowledge of another recent audit says that the amount of Ghanaian gold traded globally is 50 per cent in excess of what the gold mining companies declare by way of exports.

To date, the Ghana Revenue Authority has carried out no audit of transfer pricing on commodities. Experts say the country loses out badly in leakages through this information gap.

Speaking to the Daily Statesman, sources close to the GRA described the agency’s struggles with inadequate and badly trained staff, out-of-date information and poor logistics.

‘Record revenues’

In 2011, as Kosmos and Tullow prepared a small issue of shares on the Ghana Stock Exchange, the authoritative London-based Africa Confidential reported: “The most obvious beneficiaries of Ghana’s oil boom so far have been the shareholders of the international companies operating there.”

It added: “Tullow expects to post record revenues of $1.05 billion for the first half of 2011 as it boosts output and forecasts higher earnings in the second half of the year, due to its Ghana production. Its market value on 4 July was £11.2 billion ($17.9 billion).

With commercial production from Jubilee only beginning in 2011, Tullow paid no corporate income tax before 2013. The highest amount of corporate tax from Tullow recorded so far was in 2014, when it paid $115m. It paid nothing in corporate tax in 2015, $26m in 2016 and nothing again in 2017. As at May this year, it had paid $20m.

The discovery of the Jubilee field by Kosmos Energy in 2007 was Ghana’s first major find and one of the largest in West Africa since the 1980s. First oil was produced in November 2010. One partner in the project describes Jubilee as “a world-class, long-life production asset”. It produces on average 100,000 barrels of oil each day and there are plans to upscale production.

Ghana’s hopes for growth have hung largely on the extractive industries ‒ bauxite, gold, diamonds, manganese. The first flows of oil increased that dependence.

The Akufo-Addo government’s new plans for economic revival are based on self-sufficiency, expansion of industry and sound management of the nation’s wealth to take Ghana “beyond aid”. How secure these plans prove to be will depend on our tax authorities’ capacity to collect what is rightly due Ghanaians, and to monitor the multinationals which make fat profits from our resources.

 

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