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Ghana loses significant tax revenue through the deliberate manipulation of the tax system by big corporate entities and multinational companies, the Senior Minister, Mr Yaw Osafo-Maafo, has said.

He described the situation as worrying and tasked the Ghana Revenue Authority (GRA) to go after those companies and prosecute them if they were found culpable.

 Speaking at the opening ceremony of the eighth annual international tax conference in Accra  on Wednesday, Mr Osafo-Maafo said: “Through the so-called smart accounting, base erosion and profit shifting, significant tax revenues are lost through tax avoidance and, in some instances, tax evasion,” he said.

Tax conference

The two-day conference is being organised by the Chartered Institute of Taxation, Ghana.

The event, which is held annually, seeks to create the platform for tax experts from all over the world to discuss the challenges and issues derailing the expansion of tax revenue mobilisation.

This year’s event is on the theme: “Rethinking fiscal strategies for growth in middle-income economies”.

Evidence

Backing his claim with an example, Mr Osafo-Maafo mentioned the recent case involving the Ghana Bauxite Company that had posted substantial losses over a period of six years and yet had applied for a permit to expand its operations.

“The company, over the past six years, has been making losses, except in 2015 when some marginal profit was recorded. The total losses for the period amount to US$30 million. Ironically, this same company is applying for an additional permit to expand its operations. Does the company exist with the primary objective of making losses?” he asked.

Other issues

Outlining some of the issues that accounted for the poor performance of tax revenue, he said Ghana’s economy was characterised by an “informality bulge”.

“This means significant proportions of economic activities take place within the informal sphere. An estimated 40 per cent of Gross Domestic Product (GDP) is generated from the informal economy. It employs close to 60 per cent of the active labour force, yet about 80 per cent of those employed in the informal sector do not pay any form of direct tax,” he said.


Mr Osafo-Maafo said the anomaly must be tackled in order to engender growth towards a Ghana beyond aid.

He stressed the need for tax policies and administration to be aligned to support the development agenda of attaining economic liberation and breaking the cycle of dependency on aid and handouts.

“For this to be attained, we need an innovative and technologically driven tax regime which will address the current setback,” he said.

He also suggested collaboration among various stakeholders towards addressing the poor attitude towards the payment of taxes, adding that tax institutions must help the government mount an aggressive campaign to transform the mindset of citizens regarding taxation.