Church warns about tax haven abuse... Drug trafficking, money laundering could ensue

A new tax haven, created by the West African state of Ghana, could attract tax dodgers and drug traders seeking to launder money, unless safeguards are introduced, warns a news report.

The report, Taxation and Development in Ghana, co-funded by Christian Aid Ghana, says the potential detrimental effects of the International Financial Services Centre (IFSC) could be felt across the region.

The IFSC has been set up with the help of Barclays Bank. “The risk of illicit funds finding their way into the offshore financial centre, is particularly acute, given the extensive cocaine trade in the country, and the massive flows from oil that are expected in the near future,” says the report.

Large oilfields were recently discovered off Ghana's coast.

If the Ghanaian government is committed to the IFSC becoming fully operational, the report argues that it should first produce and disseminate credible, well-researched evidence about the potential benefits and risks for Ghana.

In addition, officials working in the Central Bank, Registrar General, and tax agencies should be extremely well versed in the relevant laws and work closely together to minimise the risks.

Furthermore, the government should introduce special methods to monitor inflows of funds from regional oil producing states, in conjunction with the Extractive Industries Transparency Initiative, because such funds are of notoriously questionable origin.

The report goes on to warn that unless Ghana co-operates in the global fight against financial crime, it was at risk of being added to the tax haven blacklist set up recently by the Organization for Co-Operation and Development.

The report estimates that Ghana, currently, loses around half of the corporate tax revenues it is due each year, to tax dodging by multinational companies.

A major part of the problem, it says, is that most tax officials lack a thorough understanding of the companies' complex tax avoidance schemes. Mining companies are highlighted as a particular problem, in that they impose major environmental costs, but contribute very little to Ghana's tax revenues, despite their large profits in recent years.

Another problem highlighted by the report, is the failure of Ghana's tax collection agencies publicly to disclose (and even, perhaps, to evaluate) the effects of the generous tax incentives the country offers foreign investors.

“The creation of the IFSC is another landmark achievement in developing Ghana's financial services sector, and Barclays is proud to have been able to partner with the Ghanaian government in this initiative.

“We adhere to the highest and most stringent levels of international regulation, rules, and industry guidance for the financial services sector.”