The Business Analyst’s Open Letter to ‘All-Knowing’ Franklin Cudjoe and IMANI Dear Franklin

When on March 6, 2013, we carried an article titled: Tax Revenue From Ghana’s Oil: FRESH ISSUES OVER E.O. GROUP TRANSACTION, we were first taken aback by your unwarranted attack on the paper, wondering what might have eaten you up to post comments such as you posted.

The story, which was a direct report based on the latest report by the Ghana Extractive Industry Transparency Initiative (GHEITI), on the country’s Oil and Gas revenues, highlighted a direct request by GHEITI to the Ghana Revenue Authority (GRA) to pursue the issue of capital gains tax on the Tullow Oil Plc acquisition of the E.O Group’s1.75% equity in Jubilee in 2011 and other such acquisitions to its logical conclusion.

The report had stated that following that transaction, even though the GRA had issued a ruling that the transaction was subject to tax, the aggregator did not come across any revenue from capital gains tax on the transaction.

The Petroleum Revenue Management Act, Act 815 section 6(e) indicates capital gains tax derived from the sale of ownership of exploration, development and production rights as a possible receipt for the petroleum holding fund.

For the benefit of our cherished readers, we reproduce below your posting which clearly shows how ignorant you are, and instead of spending time to learn you continue to inflict your ignorance on unsuspecting members of the public, with your noise and heat.

You wrote the following: “And here we are all a newspaper calling itself a business newspaper can rant as reasons for the dwindling tax revenues from our oil is lay the blame at the door steps of business men who just got their cut by introducing the jubilee partners to Ghana.....every serious business- minded journalist knows the fall in revenues was due to technical problems tullow faced, even though they and the GNPC were quite economical with the truth..very awful journalism....very awful analysis....that word Analyst should never be part of its name...” First we thought probably you played on an assumption that the subject of the story was about corporate tax. However, when after our editor sought to enlighten you by posting the story on your wall, rather than apologising for the benefit of the new knowledge provided, you went ballistics.

Franklin, it became clear that true to your character, you continued along that reckless path with unwarranted postings even though you had no clue about the subject matter that you were attacking. It was unambiguous that the article in question was neither an opinion piece nor an essay presented as an analysis as you and your IMANI often do, but a simple, straight-forward report based on a Ghana Extractive Industries Transparency Initiative [GHEITI] publication. It did not take long, however, for you to reveal from another posting that what you posted was predicated on malice aforethought, through a posting on facebook in response to a comment in the words: “may I remind you that this business analyst has in the past done far worse with running IMANI down.....”. This was in apparent reference to a publication by this paper in the past, which exposed you to the public in your attempt to pull a fast one on it by suggesting that IMANI had been voted the best think-tank in Africa, in a ranking that had another Ghanaian advocacy group and others on the continent ranked ahead of you. Exposing your lies for crowning yourself with an imaginary glory, through deception, was for us unbecoming of any serious group and the people of Ghana deserved to know. After attempting to infect the editor and visitors to your facebook wall with your warped interpretation of the story, you proceeded to advise the editor, in the words: “My brother take the paper off the shelves and do a proper analysis than this skin pain vacuous witch hunt.....en FAA taaaa mu kroaaaaa” You posted also during the exchanges with our editor on facebook that every businessman you know doesn’t ‘RESPECT’ The Business Analyst, adding that “it is a waste reading that tabloid.” As believers in free expression, we have no problem with the number of voices that want to be heard. And it is for this reason that articles by you and some of your other colleagues at IMANI found space in The Business Analyst, under our former Managing Editor, who also as editor of The Chronicle newspaper in the past, published your articles. Franklin, over the last few years, we have watched and listened to you in amusement, as you and your colleagues at IMANI scramble over each other to capture the headlines, with postulations on issues from archaeology to zoology. We have no problem at all with anybody seeking public attention, especially when they are in a business where their sponsors must hear them loud or see some write-ups to earn them a living. Think tanks, all over the world engage in research and advocacy in areas such as social policy, political strategy, political risk, the economy, the environment, science or technology, industrial or business policies, or security.

Credible think tanks influence public opinion and public policy, and support their conclusions with credible empirical data, which help decision makers.

However, what we see of you is complete pettiness and direct attacks on individuals, institutions, and everything that comes your way, in a ‘Mr. Know-It-All,’ making you ‘B-a-d Company’ for Ghanaians!

It might interest you to know that the motivation that kept The Business Analyst on the news stand was the very positive and encouraging feedback we got from industry players both home and abroad, many of whom we had never met. Unlike you and your IMANI, who want to hear your voices, sounding authoritative on every subject matter on earth, The Business Analyst has remained focused and industry players in the oil and gas sector, who know what the real issues are, do value it dearly. You might conduct a google search to locate an article published by our former Managing Editor, J. Ato Kobbie, titled: “Jubilee Oil - Why Ghana Won’t Get Tax For 3-Years”, and find a lot to learn from that piece to conclude that you owe the paper, its publishers and founding publisher-Managing Editor, an apology for those unwarranted and reckless comments you put out there. Background In April, 2010, The Business Analyst was born, not to indulge in praise-singing, but to tell the story of Ghana’s oil as it ought to be told – with the national interest as paramount! It recognised the uneasy task it had set for itself in a country where political news, especially, those bordering on sensationalism, appeared hottest in demand. Obviously, a business newspaper focused on an industry that not many people had sufficient appreciation of, was certainly not going to be easy. These notwithstanding, The Business Analyst has stayed the course, focusing on what, together with the editorial team, believed to be the real issues that will bring to the Ghanaian people, our readers and the oil and gas industry, the maximum benefits. From the first edition that introduced our readers to the legal regime governing the petroleum industry, with Paolo Scaroni of ENI’s profound piece rightly identifying the owners of natural resources, the paper published in its second edition all the varied opportunities that the advent of large commercial production of oil presented to Ghanaians. The third edition had Alhaji Asoma Abu Banda, who had lived in Nigeria at the time that country started producing oil in the 1950s, warning Ghanaians against ‘The Dutch Disease’. The rest is history. Franklin, your effusions would have been treated with the contempt that it deserved, but for those gullible Ghanaians who might get hoodwinked by your over-hyped international exposure to take your words as gospel truth.

Franklin, you claimed in one of your comment that your posting was your attempt at dealing with media terrorists, in your words: “trying to dismember that precociously terroristic media behavior exhibited by many down here...., I worked and still work with over 50 media allies just in Africa alone and trust me, this type won't rate beyond the Gulf of Guinea.”

We welcome constructive criticisms aimed at bringing out the best in the media, which has raised your profile, by giving you space. But attacking a newspaper and calling it names for reporting what is factual is certainly not one of the works of a think tank.

That The Business Analyst is a valuable paper is not in dispute as that is best attested to by the fact that our new publishers find it a worthy paper to invest in.

Finally, we ought to remind you, your sponsors and all readers that simply because you call yourself a think tank doesn’t make you one.

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We reproduce below the original story of last week and also our publication, explaining the reasons for revenue shortfall.

Tax Revenue From Ghana’s Oil FRESH ISSUES OVER E.O. GROUP TRANSACTION

By Tommy Ekpe

The Ghana Extractive Industry Transparency Initiative (GHEITI) has asked the Ghana Revenue Authority (GRA) to pursue the issue of capital gains tax on the E.O Group’s 1.75% equity sale in the Jubilee partnership, and other such acquisitions to their logical conclusion.

Tullow Oil Plc. acquired the E.O. Group Limited interest in the West Cape Three Points [WCTP] block, in 2011, with the GRA issuing a ruling that the transaction was subject to tax.

However, in its final report on the reconciliation of oil and gas sector payments and receipts: 2010-2011, GHEITI said the reconciler did not come across any capital gains tax on the transaction.

The Petroleum Revenue Management Act, Act 815 section 6(e) indicates capital gains tax derived from the sale of ownership of exploration, development and production rights as a possible receipt for the petroleum holding fund.

GHEITI has therefore recommended the streamlining of the legislation on capital gains tax to ensure that such transactions bring benefits to the country.

Tullow Oil plc, on July 25, 2012 announced the completion of its earlier announced acquisition of the Ghanaian interests of the EO Group Limited for $305 million, having satisfied all of the conditions related to the transaction. Tullow gave the effective date of the transaction as December 1, 2010, thereby increasing its interest in the West Cape Three Points license offshore Ghana by 3.5% to 26.4% and the Group's interest in the Jubilee field, which it, by 1.75% to 36.5%.

GHEITI also called for the harmonization of the Petroleum Income Tax Law (PITL) and the Internal Revenue Act, Act 2000, saying there is no provision in the PITL that relates to excessive interest charges even though interest expense is generally deductible in determining the chargeable income for corporate tax purposes.

It said there was the risk that taxpayers may use unlimited interest payments to strip profits, resulting in lower corporate tax payments while Section 41 of the PITL, 1987 provided that without express exemption of a contractor from taxation, the general law or provisions thereof relating to taxation may apply.

On losses carried forward, the report said tax losses under the PITL are carried forward indefinitely, adding that under the IRA, ACT 2000, the losses are carried forward for only five years for mining operations. It said the practice under the Income Tax Law, however, was that capital allowances did not create losses and are carried forward indefinitely.

GHEITI therefore recommended that tax losses are carried forward for five years in the petroleum industry as pertains in the mining industry.

“The practice of carrying forward capital allowances indefinitely in the mining sector may also be extended to the petroleum industry”, it said.

Touching on ring-fencing, which refers to the limitation on consolidation of income and deductions for tax purposes by the same taxpayer for different projects or activities, the report said ring-fencing legislation had been passed, under the Internal Revenue (Amendment) Act, 2012, ACT 839, to disallow the deduction of expenses exclusively incurred in a mining area against revenue derived from another mining area belonging to the same taxpayer or in which the taxpayer has an interest in the determination of chargeable income.

Currently, the petroleum industry does apply ring fencing to contracts. However a contractor may set of expenses that are exclusive to a production area against income from another production area and this may delay corporate tax revenues.

GHEITI therefore recommended that a legislation similar to the amendment on ring fencing in the mining sector should be introduced in the petroleum industry to production areas.

“As many fields commence production, ring fencing legislation is needed to ensure early corporate tax receipts” it said, but added that it should however be viewed against the need to obtain more geological data from greenfields.

On capacity building, the report said since the oil and gas sector is an emerging industry in Ghana with only few members of staff engaged in the petroleum sector at the GRA, Ministry of Finance and the Bank of Ghana, there was the need to increase the numbers and speedily build up the capacity of officers of all the agencies involved to enable them carry out their functions efficiently and effectively.