Ghana has thrown its support behind a global discussion to bring uniformity to the corporate income tax regime to help stop tax avoidance by businesses.

The Minister of Finance, Mr Ken Ofori-Atta, said a uniform global corporate minimum tax rate of 15 per cent was crucial to encourage compliance.

On day two of the maiden Ghana Diaspora Investment Summit 2021 by the Ghana Investment Promotion Centre (GIPC) in Accra on June 24, Mr Ofori-Atta observed that an imposition of a uniform corporate minimum tax rate would help stop tax avoidance which resulted in an outflow of funds.

On the theme: “The new normal: Leveraging diaspora investment to build back better”, the two-day summit focused on how to attract investment and create opportunities for the diasporas.

The hybrid event (simultaneously physical and virtual) hosted personalities such as the Head of Mission of the African Diaspora Forum, Mr Erieka Bennet; the Secretary-General of the African Continental Free Trade Area (AfCFTA), Mr Wamkele Mene; and Mr Ofori-Atta.

Mr Ofori-Atta stated that some multinationals also took advantage of the country’s regime to avoid complying with the 25 per cent corporate tax rate.

“A recent discussion on the minimum tax of 15 per cent will lead to a change in illicit financial flows which see billions leave this country not by marauding pirates but by very decent multinationals we can’t chase because we do not have the technology.

“The 15 per cent minimum will bring quite a bit of resources,” he said.

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G7 nations

Multinational companies have been taking advantage of existing tax rules by shuffling money among jurisdictions with super-low rates.

The International Monetary Fund (IMF) estimates that 40 per cent of all foreign direct investment is phantom in nature, meaning it's money that passes through empty corporate shells, often for the purposes of lowering a company's tax bill.

As a result, finance ministers from G7 nations have announced their support for a global corporate minimum tax regime which will require companies to pay at least a 15 per cent rate in each country they operate in.

The move represents one of the biggest attempts to change an outdated global tax system for a better system.

Read: GIPC records $780m inflows in 6 months

Ghana’s analysis
In Ghana, the minister said a recent analysis conducted by the Minister of Finance (MoF) on firms in the country’s extractive sector showed that taxes some of them paid to the government were devaluated through legal means.

According to him, one of the surprising outcomes of the analyses was that among the oil companies selected, the effective tax paid to the government (actual amount of tax paid as a percentage of taxable income or profit) was about four per cent.

He explained that the companies were able to legally find loopholes that they exploited to reduce their tax burden and in some instances, the State was not well equipped to challenge the figures.  

“We just did a bit of analysis last week about some of the oil companies and the effective tax was about four per cent and you begin to understand how these things are legally done,” the minister said.


AfCFTA advantage
For his part, Mr Mene said the Ghanaian diaspora community needed to take advantage of the opportunities presented by the AfCFTA by harnessing the trade and investment engagements within the country.

That, he said, would enable them to take advantage of the continental market size of more than one billion people with an aggregated gross domestic product of $3.4 trillion created by the agreement.

He observed that efforts to attract the diaspora could focus on three key economic areas: investments, knowledge and skills and trade facilitation.

He said in terms of investments, mechanisms could be put in place to tap the diaspora as preferred foreign direct investors in continental development projects.

“From the perspective of knowledge and skills, the diaspora can provide long- and short-term human capital support in strategic sectors to drive Africa’s economic growth.

“Human capital support can begin with knowledge transfer from the diaspora back to the home country through collaboration, mentoring and training,” he said.

Regarding the trade access, he said the diaspora could serve as market entry facilitators, importers, distributors and co-investors for African export initiatives targeting global markets.

“For diasporas, the continent is enticing as an investment destination on many fronts. It remains the continent with the fastest growing economies, as well as the youngest globally.

“The continent’s youth dividend will also make the continent attractive as a potential global manufacturing base.

“The mobile telephone revolution will facilitate not just intra-Africa trade but also enable real-time communications with diasporas,” he said.

The Chief Executive Officer (CEO) of GIPC, Mr Yofi Grant, added that the government would continue to create an enabling environment to attract Ghanaians living abroad and the African diaspora to invest their resources in the country.