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General News of Monday, 30 May 2011

Source: Public Agenda

Editorial: Review Petroleum and Mining Contracts

Government has once more been called upon to review all mining and petroleum contracts regardless of the presence or absence of stability clauses in order to increase government equity or revenue and redirect investment.

If for nothing at all, Ghana must emulate the examples of Tanzania, Zambia and other countries worldwide which have reviewed all mining and petroleum contracts irrespective of the status of stability clauses, according to the Tax Justice Network Ghana.

It is also the opinion of the Network that government needs to strengthen the capacity of the Ghana Revenue Authority (GRA) to monitor and collect all resource rents, particularly petroleum and mining revenues.

These were contained in a communiqué adopted at a Strategic Planning Session of the Tax Justice Network Ghana held last week in Kumasi. The session, which was attended by representatives of civil society organizations and their partners, was coordinated by the Integrated Social Development Centre (ISODEC).

Indeed, the Network's call for the strengthening of the GRA comes almost immediately after revelations that Ghana could be losing unspecified sums of oil revenue as a result of non-functional oil export meters fitted on the Floating, Production, Storage and Off-loading (FPSO) vessel at the Jubilee Fields.

In recent times, government has attempted to rationalize revenue agencies and initiate tax reforms as was spelt out in the 2011 Budget. In the light of this, the communiqué applauded government, recognising that such reforms are important for the sustainable financing of Ghana's development with greater citizens' responsibility and representation.

It, however, argued that Ghana's tax system focuses more on indirect tax systems which are regressive in nature. Besides, the absence of a long-term national development strategy with broad consensus on spending priorities will continue to encourage wrong investment decisions and mismanagement of tax revenues, culminating in serious negative implications for the economy.

In order for proposed reforms to meet the aspirations of Ghanaians, there was the need for principles of transparency, accountability and the democratic participation of citizens in decisions and choices that are made in respect of national policies.

The Network observed that democratic governance is undermined when a state relies unduly on donor support and pointed out Ghana's high potential to increase its domestic revenue with a little more effort.

Among other things, it recommended that government continues to strengthen tax policies and administration to avoid the loss of revenues to the state, take steps to ensure tax compliance by building credibility through the evidential use of tax revenues for the benefit of Ghanaians, and make a concerted effort to educate the general Ghanaian public on their tax obligations within the context of a right to essential services financed by tax revenue.

Still, government should grow and diversify "the national economy through value addition to primary products from which revenues can be raised for national development."

Other recommendations were that: Government becomes more circumspect in entering into Double Taxation Agreements (DTA); Government supports the call for Country-by-Country reporting and publication of information on contracts and agreements; Government encourages a closer collaboration between Revenue Collecting Agencies and the Bank of Ghana to help deal with tax evasion and tax avoidance issues; and Government ensures a progressive increase in Ghana's tax-to-GDP ratio as a way of strengthening the social contract between government and citizens.

Furthermore, tax exemptions and concessions should be properly reviewed to ascertain their benefit to the wider Ghanaian society. At the same time, "punitive actions for tax malfeasance should be made deterrent enough to reduce the incidence for tax evasion."

Concluding, the Tax Justice Network Ghana said effective coordination and continuous vigilance of Ghanaians on taxes paid would be required to ensure that tax and other revenues are used for sustainable national development.