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Big companies manipulating tax system, gov't loses revenue

The Senior Minister, Yaw Osafo-Maafo said the situation was worrying and called on the Ghana Revenue Authority (GRA) to ensure such companies pay the right tax or are prosecuted if found culpable for evading taxes.

Mr Osafo-Maafo was speaking at the opening ceremony of the eighth annual international tax conference in Accra on Wednesday (August 22, 2018).

He said the situation was worrying and called on the Ghana Revenue Authority (GRA) to ensure such companies pay the right tax or are prosecuted if found culpable for evading taxes.

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“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.”

As an evidence to back his claim, Mr Osafo-Maafo mentioned a 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.

However, Mr Osafo-Maafo this is happening because the economy is characterised by an “informality bulge”.

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

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He said these issues must be addressed for Ghana to develop. 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 a better collaboration among various stakeholders towards addressing the poor attitude towards the payment of taxes.

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