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Opinions of Wednesday, 24 June 2009

Columnist: Amponsah, John

Discussion - Ghana to become a Tax Haven

by John Amponsah

The UK Guardian newspaper earlier this year wrote an article pointing out the central role Barclays bank is taking in helping Ghana become a Tax haven in West Africa. The Guardian article was published on Ghanaweb in May of this year. It has also been in the news lately that groups of UK investors are heading to the country to find out ways and means to promote invest.

According to the Guardian newspaper, when Ghana becomes a tax haven, companies like Barclays will benefit greatly by having the huge mineral wealth of West Africa "vanish into [Barclays]". Mineral and oil wealth from countries like Equatorial Guinea, Ghana, Nigeria, and Sierra Leone will be absorbed into Barclays which will be operating as an off-shore bank. Although Barclays has taken the leading role in helping transform the tax laws in Ghana, it is likely that once these laws come into effect, other banks and businesses will also want to get into the country. The UK and US oil companies that are coming into the country will likely work with banks like Barclays to stash oil revenues in the bank. Two main oil companies operating in Ghana are Tullow (Irish) and Anadarko (American). In the case of Tullow and Anadarko the actual CEOs of these two companies were in Ghana in March of this year to see the president. It is interesting to note that the transformation of Ghana's Tax laws in order to allow Barclays to become an offshore bank (i.e. having tax haven privileges) began "four years ago" (as of 2009), according to the Guardian article. Since the current president of Ghana is a tax expert, this particular subject is likely to be of great interest to him.

Some popular tax havens include Andorra, the Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Costa Rica, Cyprus, Gibraltar, Luxembourg, Malta, Monaco, Panama and of course good old Switzerland. In fact most of the Caribbean and some Pacific Islands (Cook Islands, Tonga, Vanuatu as examples) are tax havens. In Africa, Liberia, Mauritius and Morocco have measures in place to attract offshore businesses. Of late, together with the Caribbean tax free havens, Costa Rica has become a popular destination for individuals and businesses who want to benefit from tax breaks.

QUESTIONS The first question I would like to raise is, what are the ramifications of having a country like Ghana become a tax haven? For one it is clear to imagine that more businesses will be attracted here. It is also possible that more freedom-oriented "sovereign" individuals will be attracted to Ghana to escape taxation in the countries where they were previously resident. Conceivably the government of Ghana will work to ensure that gaining tax haven status will benefit the country and its citizens in a positive way. Individuals and companies who bring their money and their business to Ghana's tax haven will be looking to benefit from the favourable conditions in the country so the government should also ensure that the people of Ghana benefit from such an exchange.

The second question I would like to raise is, are tax laws being changed only to allow businesses and banks to more easily operate in Ghana or have the tax laws changed to, for instance, affect a wide range of tax options such as personal income tax, capital gains tax, capital transfer tax, inheritance tax, VAT and wealth tax as examples. It is known that expats often are attracted to countries where there is a broad spectrum of tax advantages, perhaps the government can make money by increasing the resident permit costs for expats, while easing life for Ghanaian citizens. If big companies like Barclays can get tax breaks then perhaps the common Ghanaian worker can also benefit from the changed tax laws. It seems to me that the changes being made to the tax laws may largely benefit large companies rather than individuals, however this is only a hunch. I hope that articles like this one will encourage discussion into how Ghanaians can benefit from Ghana becoming a tax haven.

The third and final question is, are there going to be other changes in law to protect the country and its people from any possible abuses or "complications" that can arise as a result of Ghana becoming a tax haven, or is it only going to be a change in the tax laws to allow or even encourage foreign individuals and businesses to bring their investments here? Tax havens can sometimes also become havens or conduits for money laundering and other forms of corruption. In order to benefit from Ghana becoming a tax haven, it may be necessary to have more stringent measures put in place to ensure fair business practice and accountability.

The final question is, will making Ghana into a tax haven make it easier for rich individuals and companies to "buy out" the country from Ghanaians or will the government of Ghana place legislation to protect the property of the country? For instance in Bermuda, the sale of land and property to non-Bermudans is restricted. This is an interesting move by the Bermudan government, since it shows that Bermudans will benefit from their tax-free haven while not selling out their country to those who have more money, and who take their business to Bermuda. Ghana could benefit greatly from a measure such as this one.

I hope that more questions will be raised and that experts on this issue will contribute to the discussion.

LEARNING FROM THE OTHER TAX HAVENS It seems that one of the ways tax havens benefit from their status is to create what are known as "free zones". Dubai, knowing that oil is not guaranteed to flow forever, created the Jabel Ali Free Zone (JAFZ) in 1985 to attract foreign investment. This free zone is specifically aimed at trading companies, manufacturing companies and the services industry and provided these three with a wide range of incentives to encourage business. The island of Madeira (Portugal) as well as the Bahamas (Grand Bahamas Island) have free trade zones. Jamaica has had the Montego Bay Free Trade Zone since 1984. Ireland's Shannon Free Trade Zone has existed since 1959. Several other countries such as Turkey and Lithuania also have these Free Trade Zones. In the case of Ghana, perhaps the Dubai example may be the closest and most applicable scenario, given the presence of oil in both countries. So perhaps Ghana may be able to have a free trade zone that could encourage setting up businesses in the services industry, manufacturing, trade, tourism and perhaps even in technology. This way, small and medium-sized to large companies can also benefit from Ghana becoming a tax haven, not only the big banks like Barclays and the oil giants like Tullow and Anadarko.

CONCLUSION Barclays bank seems to be a leading force in getting Ghana to become a tax haven. It is likely that many companies will benefit from Ghana becoming a tax haven. The Author of this article hopes that the government of Ghana will take appropriate measures to protect the country's status as a tax haven while encouraging foreign investment that will benefit not only those who own these businesses but also (more importantly) the people of Ghana.

Since this issue is currently in development, interested Ghanaians are encouraged to discuss it in order to keep abreast with developments that are taking place between the government of Ghana and various external interest groups who seek to benefit from the country becoming a tax haven.

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