A lack of adequate data on the operations of businesses in the extractive sector is impeding the Ghana Revenue Authority’s (GRA’s) ability to fully implement Ghana’s transfer pricing policy according to a top tax official.
Deputy Commissioner in charge of Policy Programmes at the GRA, Edward Gyamerah, is concerned about companies’ use of under- and over-invoicing in their transfer pricing activities.
Lack of data
The lack of data makes it difficult for the GRA to fully assess costs declared by companies for taxation purposes according to Gyamerah.
“One of the major challenge which is facing the department has to do with data… we ask ourselves which data should taxpayers use in arriving at their arms length prices. I do not think we have that data,” he stated.
Transfer pricing policy
Transfer pricing, a mechanism by which prices are chosen to value transactions between related legal entities within the same multinational enterprise, may be abused when enterprises inflate prices compared to the ordinary market prices. This subsequently reduces companies’ profits and corporate tax obligations.
But the GRA cannot pursue them through the courts because the tax authorities have insufficient data on costs and pricing to bring successful legal actions against the companies according to Gyamerah.
He said that other challenges in collecting fair tax revenues from the extractive industries included the lack of independent verification of the fineness of the gold exported from Ghana.
While the mining companies and refineries provide assay results as the basis for calculation of royalties, the government lacks the facilities to independently evaluate gold fineness, exposing it to risk of under invoicing.
In addition, the GRA receives no information from other tax jurisdictions on parent companies or affiliates of companies registered in Ghana.
Categories: Trade Based Financial crimes News