Companies brace for GRA tough line on profit-shifting

Businesses operating in the country are deliberating on the tax and business implications of the renewed focus of the Ghana Revenue Authority and the Ministry of Finance and Economic Planning on transfer pricing (TP).

Transfer pricing refers to how related parties within a group business price their transactions with one another and how intra-group income from the transactions are shared.

Amanda Layne, the Manager of International Tax Services, Transfer Pricing, at Ernst and Young (EY) said: “We are finding that TP documentation requirements are becoming more and more across the board. The G20 has placed TP as a major global focus. Profit-shifting is a major concern for most jurisdictions, and Ghana is no exception to that”.

Ms. Layne, who was speaking at an EY-organised transfer pricing workshop in Accra for businesses, said the workshop was organised “because of the focus globally, regionally, and locally on transfer pricing.

“Because we found that the Ghana Revenue Authority (GRA) and the Ministry of Finance and Economic Planning have placed such a priority on transfer pricing, it’s important that companies operating in Ghana understand the implications TP will have on their operations.”

From the GRA’S perspective, by focusing on TP in an audit they are able to determine whether or not they are really receiving their fair share of a multinational’s profit, and they adjust the income when they feel the TP is not appropriate.

Ghana, as with many other countries, is seeking ways in which to deal with a large fiscal deficit and TP is a way of ensuring that government gets what is due it, Ms. Layne said.

The country’s budget deficit was 10.2 percent of GDP last year, and the government has said its plans to cut the gap to 8.5 percent of GDP this year.

Patrick Oparah, an Associate Director of Tax Services with EY, said Ghana and Nigeria are well-placed to enforce transfer pricing regulations -- but warned of seeking a balance between securing the country’s tax base and creating a conducive business environment.

“Because TP regulations in Ghana and Nigeria have recently been introduced, they have the benefit of looking at how it’s done elsewhere. So their regulations have been drafted based on best practices elsewhere. Those regulations put the Ghanaian and the Nigeria authorities in a strong position to enforce transfer pricing regulation,” he said

“There is a balance that has to be found in every country by protecting its tax base and creating a conducive environment for business,” he added.

The challenges, tax experts note, are the resources and the skills to dedicate toward transfer pricing regulation enforcement. “Drafting legislation may be the easiest step; the next step is actually enforcing it,” Mr. Oparah said.