Business News of 2014-03-04

Ghana loses US$70 million in oil and gas sector

Ghana lost about $70 million over the past two years in the oil and gas sector due to her inability to apply the Capital Gains Tax provided in the Internal Revenue Act, 2000 (Act 592).
The loss emanated from the sale of EO Group’s 3.5 percentage stake in Kosmos Energy to Tullow Oil and Sabre Oil’s sale of a 4.05 per cent share in Tullow Oil to South Africa’s national company, PetroSA.
Bernard Anaba, Policy Analyst of Integrated Development Centre (ISODEC), who disclosed this during a presentation of a research finding on tax incentives in Ghana, said the country might have lost about $45 million annually since 2011 due to the inability of government to apply the new fiscal rates.
This, he noted, could be attributed to the stability agreements negotiated with the afore-mentioned companies.
Stability agreements or clauses, he explained, were usually provisions in the contracts of mining companies which freeze the tax laws of the host country in respect of their applicability to the said companies for periods between 10 and 15 years.
Anaba said the findings also revealed that as a result of trade tariff rationalization and the general tax incentive policy since the early 2000 to date, Ghana had lost about US$1.2 billion a year based on current prices and estimates.
He said Ghana has one of the lowest overall tax rates in the West African sub-region as a result of a drive towards trade and investment competitiveness, its accompanying corporate abuses, especially in the extractive sector resulting from morbid contractual agreements and the incoherent and varied interpretation of the applicable laws.
Anaba said the idea that multinationals need tax incentives before they could operate in the country was not entirely true, stating that “having a stable investment climate and infrastructure such as good roads, good legal system, regular supply of water and electricity are enough to attract investors.”
He said Ghana as a lower middle-income country was no longer enjoying certain categories of loans and grants, and that had to be balanced by the creation of an effective tax regime to be able to generate more revenue for national development.
Source: Daily Guide
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