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| Offshore Banking May Fail Ghana |
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| Date: 06-Nov-2009 |
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Ghana stands the risk of being blacklisted by the Organisation for Economic Co-operation and Development (OECD) if the country throws caution to the wind and adopts a financial regime which has all the characteristics of a tax haven arising out of moves to become a full-scale Offshore Financial Centre.
Followers of the Ghanaian reform system point out that Ghana's current and proposed legislation adheres to the broad haracteristics of those OFCs that also function as effective tax havens. Tax havens have secrecy provisions that are thriving conditions for foreigners to stash stolen monies.
Tax havens also foster money laundering and facilitate tax avoidance and tax evasion by foreign films. Already, the Organisation for Economic Co-operation and Development (OECD) Development (OECD) has said it will blacklist Ghana once it becomes a tax haven.
If blacklisted, Ghana's reputation would further be tainted. Ghana has suffered bad reputation from drug scandals and internet fraud among others. Ghana's status as a tax haven will certainly have a negative impact, specially on its neighbours in the sub-region and across the continent, according to several tax justice advocates and experts who participated in a West African Tax Justice Seminar at Dodowa, near Accra recently.
The Integrated Social Development Centre (ISODEC), Christian Aid (UK) and the Tax Justice Network-Africa jointly organized the seminar under the theme Tax and Democracy - No Representation without Taxation. OFCs are jurisdictions that welcome banking, investment that welcome banking, investment and business registration from individuals and businesses that are based outside of the host country.
An offshore facility operates independent of the local economy and enjoys low tax rates. It also has secrecy provisions that can aid people to steal monies. Companies can also hold their assets in tax havens and avoid taxation in their countries origin.
By September 2007, the first Offshore Banking facility in the whole of the sub-region was set up in Ghana following amendments to the Banking Act six months earlier. Government was expected thereafter to take further steps to strengthen and refine regulatory provisions.
Though, these reforms are pending, current and potential regulatory provisions give Ghana the features of a tax haven. Wilson Prichard of the Institute of Development Studies, University of Sussex, and author of Taxation and Development in Ghana: Finance, Equity and Accountability, points out that existing and proposed legislation promises fully-fledged ring fencing; total exemption from taxation for offshore banking entities; and total exemption from taxation for businesses listing in the off-shore jurisdiction.
Legislation also proposes reduced regulatory requirements and capital adequacy rates for offshore banks, and efforts to expand secrecy provisions, despite some tension with Ghana's extensive anti-money laundering laws. It is estimated that as many as five thousand (5000) jobs could be created if Ghana were to emerge as a leading global Offshore Financial Centre (OFC), among other benefits.
On the face of it, the Ghana government could be justifiably tempted by the potential benefits of offshore banking.
But in view of the seeming benefits mentioned, Dr Matti Kohonen, Consultant to the International Secretariat, Tax Justice Network, has expressed concern that "monies from the sub-region could be hidden here" and "we are afraid that this will contribute to corruption," he said.
The Tax Justice Network currently identifies approximately 70 tax havens world-wide, which manage over US$11 trillion of global wealth. "Given that there a few reasons to make use of such OFCs other than for purposes of tax avoidance and evasion or for disguising illegal activities, it is fair to assume that the enormous stock of wealth held in OFCs represents a major cost to global welfare," says the Prichard report.
Rebecca Teiko Dottey, Policy and Programmes Manager of Christian Aid, Ghana Office, told Public Agenda that with oil flow expected in Ghana, an offshore facility, because of the secrecy provisions, could be very dangerous. "It can be a place for abusing oil money ... what that means is that people are not going to pay taxes on the money." She also has fears that people can put drug money in offshore facilities.
The Mills administration is believed to be re-considering legislative proposals, which the Kufour government could not carry through.
Mrs Teiko Dottey has therefore urged government to do an analysis of the impact of offshore facilities before taking further steps. This would be important, especially when the Prichard report says "There appears to have been relatively limited rigorous analysis of the potential costs and benefits to both Ghana and its neighbours."
Mr Vitus Azeem, Executive Secretary of the Ghana Integrity Initiative, points out that just as foreigners are going to bring in their monies, those in Ghana are going to repatriate untaxed monies without being queried. |
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| Source: Public Agenda |
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