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Illicit Financial Outflow Bleeding Ghana To Huge Financial Loses 

By Abubakari Seidu Ajarfor
Business & Finance Illicit Financial Outflow Bleeding Ghana To Huge Financial Loses
APR 27, 2017 LISTEN

The Campaign Coordinator of the Integrated Social Development Centre (ISODEC), Dr. Steve Manteaw said Ghana is losing billions of dollars to transfer pricing, undervaluing of imports and overvaluing of exports.

He added that the main conduits for these losses are corruption and profit shifting in projects and trade deals where companies move profits from their subsidiaries in higher tax countries where the real economic activity takes place to other subsidiaries in tax havens.

Dr. Manteaw noted that an experiment conducted by ISODEC by importing and clearing some items (video cameras, microphone/speakers, and projectors) also revealed that the items were undervalued, costing the nation a total of 101, 781.20 dollars in unpaid taxes.

Speaking at a media soiree in Accra, the Campaign Coordinator noted that in the case of transfer pricing in the oil and gas sector, Ghana lost millions of dollars through transfer pricing in the Ghana Gas – SINOPEC transaction which is the Western Corridor Gas Infrastructure Project.

He added that while it is comforting that the TP [Transfer Pricing] unit of the GRA has so far retrieved over GH¢ 10million in additional taxes and penalties raised as a result of its ongoing audit of the transaction, it is feared that without addressing the identified institutional lapses, Ghana risks more devastating haemorrhage of critically needed revenues to finance its development commitments under the SDGs.

Dr. Manteaw emphasised that Ghana and other African countries lost huge sums of money annually through illicit financial outflows that could otherwise be used to finance development on the continent.

Making reference to estimates published by a group of civil society organisations in the Honest Accounts, he posited that Africa lost an estimated 41.3 billion dollars in financial outflows annually, more than the total development aid that came to the continent.

It also emerged that the civil society organisations which include ISODEC, Global Justice Now, and Jubilee Debt Campaign noted that global losses through IFFs stood at 500 billion dollars annually.

Presenting highlights of a study undertaken by ISODEC and other joint partners on the issue of trade mis-pricing in Ghana, Dr Manteaw stated that “the study found that Ghana’s export to the European Union (EU) was undervalued by an estimated 2.7 billion Euros during the 13-year period between 2000 and 2012; being 14 per cent of the total value of export to the EU.”

According to him, the analysis, which used data from EUROSTAT for trade with the EU, also found that Ghana’s import from the EU within the period was overvalued at 2.8 billion Euros; 14 per cent of the total import from the EU.

“An analysis of United States (US) merchandise trade database for US-Ghana trade also found that Ghana’s exports to the US within the period was undervalued at an estimated $633 million, which represents 21 per cent of total value of export to the US, while Ghana’s imports from the US were overvalued by an estimated 573 million dollars; eight percent of total imports from the US,” he intimated.

Dr. Manteaw stressed that the surest way reduce or stop illicit financial flows (IFFs) in Ghana is to forbid tax havens amongst multinational organisations.

“Transparency provides the cover for various types of manipulations or systems that lead to the erosion of profits that could be taxed by host governments. A company could be making huge sums of money in terms of profit in this country but they find ways, sometimes, through over inflated professional fees and transfer mispricing, to move these monies that should have been taxed into tax havens, where they enjoy protection because of the secrecy surrounding those banking activities,” he posited.

The Campaign Coordinator also recommended the introduction of IT-mediated solution, a kind of intranet that links up the various divisions, departments and units of the GRA, to help them monitor in real time, the various transactions that take place in a day.

He added that shifting of tax mix away from profit taxes (where developing countries like Ghana currently do not have the capacity to manage) toward less pricing-manipulating taxes like production-based taxes such as royalties, which are easier to administer.

Mr. Manteaw urged government to design, implement, monitor and evaluate a real-time model for tracking and eliminating trade mis-pricing in commodities and train and resource the tax authority to implement same.

He concluded by indicating that the planned enactment of the Fiscal Responsibility Act or any future amendment of the fiscal responsibility provisions in the Public Financial Management Act contain severe sanctions for the violation of constitutional provisions in respect of tax waivers.

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