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xxxxxxxxxxx of Saturday, 31 October 2015

Source: Dowuona, Samuel

MTN responds to tax avoidance accusations

The MTN Group and the MTN Ghana have responded to recent accusations of shipping hundreds of millions of dollars out of poor African countries into tax havens while paying less taxes.

Investigations by a group of journalists across Africa revealed MTN Ghana, Nigeria and Uganda in particular, have been shipping part of their revenue before tax regularly to MTN Dubai supposedly to pay for management services and technology transfer. But the moneys are often further shipped from Dubai to tax haven Mauritius (where MTN does not have a single staff) to avoid tax.

MTN Group and it operations in the respective countries DID NOT DENY shipping out moneys from poor countries but rationalized the shipment as legitimate payments for technology transfer and management fees, which were all agreed upon with the appropriate authorities in the respective countries. In Ghana, the approval was given by GIPC.

MTN Ghana was said to have shipped GH 758 MILLION, which is almost 10% of its revenue between 2008 and 2013. This was the highest percentage of shipment compared to less than two percent of transfers from MTN Nigeria and four per cent from Uganda.

A Thabo Mbeki committee has described such huge transfers by multinationals out of poor African countries as "illicit" and "unethical".

But the telecoms giant insists all is well and good because they neither broke any regulations/laws nor did they breach any of the legitimate agreements they had with state authorities prior to the transfers.

Here is a the full statement on the MTN Group website, plus questions investigators posed to MTN Ghana specifically, and their responses.

MTN Group Response
MTN complies with all regulations and laws, including tax laws, in the countries where we operate, which include South Africa, Nigeria, Uganda and Ghana.

Regulatory matters in our markets are addressed directly with local authorities when required, and where applicable, duly reported in our Annual Financial Statements, as per our JSE listing requirements.

Owing to the evolving nature of our business operations and compliance frameworks in our markets, MTN continually engages authorities to find mutually agreeable ways to meet our obligations.

Where the relevant authorities may have queries, MTN has always been accessible to engage on such matters. At no point has MTN ever been found to be involved in any scheme that seeks to help the company evade its tax or legal responsibilities in any jurisdiction where we operate.

- Issued by MTN Group Corporate Affairs

Questions MTN Ghana and answers

We understand that Mrs Mawuena Trebarh, the current head of the GIPC was head of government relations at MTN Ghana prior to taking up her new role. Can the company confirm that Mrs Trebarh’s responsibilities included negotiations with GIPC about management fees.

We assume by management fees you are referring to payments made on the basis of a technology transfer agreement. The Technology Transfer Agreement that was the basis of past payments expired in 2014. The registration process for a new technology transfer agreement commenced after Mrs Terbarh left Scancom in 2011. Hence Mrs Trebarh did not have occasion to negotiate with GIPC about management fees on behalf of Scancom.

As you know management fees from Ghana are paid to MTN Dubai. This is the same as with MTN Nigeria. However, MTN has confirmed to us that management fees paid by MTN Nigeria to Dubai are then sent on to MTN Mauritius.

Could the company confirm whether the same transaction occurs with MTN Ghana. Are the final destination of management fees paid from MTN Ghana Dubai or Mauritius.

Scancom’s technology transfer agreement is with MTN Dubai. MTN Dubai is responsible for fulfillment of the obligations under that agreement, as well as the rights thereunder. Payments in relation to a technology agreement will always be made to the entity with whom the agreement has been executed and registered with GIPC.

We will be reporting that between 2008 and 2013 the company paid 758 million Ghana Cedis to MTN Dubai. This accounts for an average of 9.64% of MTN Ghana’s revenues over that period. We have confirmed these figures with MTN head office.

Could the company explain why management fees in Ghana are significantly higher than in other MTN companies? Our investigation has found that management fees paid by MTN Uganda are 3% of revenue and in Nigeria they are 1.75% of revenue.

We cannot comment on what the fees are for other operating companies in other jurisdictions. Fees paid by Scancom were based on what has been agreed between the parties based on the value placed on IP and technology to be transferred, and registered with the GIPC.

It is our understanding that the usual maximum amount of management fees allowed by GIPC is 6% - why does MTN require significantly higher fees to be paid?

We are not aware of a “usual maximum amount of management fees allowed by GIPC.” Determination of fees between Scancom and MTN Dubai are based on value of IP and technology to be transferred.

We will report that currently MTN’s management fees have been suspended as the company has not been able to reach an agreement with GIPC over the current level of fees.

We have been told that the first proposal from MTN was rejected as it was not compliant with Ghanaian law. Could the company provide a comment on why it has been unable to reach an agreement with the GIPC.

There is no disagreement with GIPC over the level of fees. Technology transfer payments are made pursuant to a valid agreement. Under Ghanaian law, a technology transfer agreement becomes valid upon registration with GIPC. The technology transfer agreement that was the basis for past payments expired in April 2014. As required by law, we are in the process of registering a new agreement with GIPC.