GRA withdrew MTN’s $773m back tax claim after threats – Bloomberg report

Ghana currently faces a huge revenue problem as it struggles to pay its debts.

However, Bloomberg stated that due to the current state of affairs, Ghana seems “desperate” and may put investments in the country at risk.

Here is Bloomberg’s report:

Ghana’s attempt to bring in hundreds of millions of dollars from some of its biggest investors for alleged unpaid taxes may have backfired.

With the country struggling to service about $47 billion of public debt and with a $3 billion rescue package from the International Monetary Fund yet to be finalized, the government is desperate to boost revenue. The methods it used, though, are risky — harming its standing with investors and the nations they come from.

It all started last month with a demand that South Africa’s MTN Group hand over around $700 million in back taxes, penalties and interest. Gold Fields, Tullow Oil and Kosmos Energy were also hit with charges. All the companies disputed the claims.

The demand on MTN, the continent’s biggest mobile-phone operator, drew a rare rebuke from South Africa.

Naledi Pandor, the foreign minister, wrote in a Friday evening statement that the dispute should be resolved amicably. She pointed out that more than 100 South African companies do business in Ghana and have invested over $1.4 billion over the past decade, providing jobs for more than 19,000 Ghanaians.

Pandor warned Ghana that in other African countries where South African companies had faced “challenges,” they had disinvested, damaging their economies.

A few days later, the West African nation’s tax authority withdrew the claim against MTN.

The strategy is not unprecedented — Nigeria’s demand for $4.4 billion in back taxes from pay TV service Multichoice last year led to an acrimonious fight and an out-of-court settlement. It had also previously targeted MTN.

Ghana is desperate for cash with the spiraling debt crisis almost halving the value of its national currency over the past year and driving inflation to 54%.

Still, it might find the short-term gains of fuller tax coffers may deter the investors that made it Africa’s biggest gold producer and built an oil industry.

Background

The Ghana Revenue Authority withdrew the earlier request for back payment of taxes worth US$773 million from 2014 from MTN Ghana Ltd according to several reports.

According to Bright Simons, Vice President of IMANI Africa, who shared the news on Twitter, the new development came to light following an update on the Johannesburg Stock Exchange.

“An update to the Johannesburg Stock Exchange today says that the govt of Ghana (GRA) has withdrawn the demand for back taxes from telecom giant, MTN. The earlier decision was attacked & mocked because it was based on work by Safaritech, which some analysts describe as “shady”,” he wrote on February 3, 2023.

In a corresponding Bloomberg report, the international website said, “Ghana’s decision came after “extensive and productive discussions” during a 21-day negotiation period between the West African nation’s authorities and the mobile-phone operator, MTN.”

Earlier this year, the Ghana Revenue Authority (GRA) wrote to MTN Ghana demanding an amount of US$773 million from the telecom giant which is a local subsidiary of the MTN Group, the South African mobile telecom giant.

According to documents sighted by GhanaWeb, the amount is in lieu of back taxes over a five-year period spanning 2014 to 2018.

It includes the unpaid tax sum along with penalties and interest charges, the MTN Group said on Friday (January 13).

The Ghana Revenue Authority issued MTN Ghana with the bill after auditing it for the years 2014 to 2018 and inferring that the company under-declared its revenue by about 30% during the period.

MTN Ghana challenged the position of GRA and announced it was going to ‘fight it’.

The telco stressed that all previous taxes had been duly honoured and that it disputes the “accuracy and basis” of the assessment.

“MTN Ghana believes that the taxes due have been paid during the period under assessment and has resolved to defend MTN Ghana’s position on the Assessment,” the company said.

The MTN Group has a presence in 19 countries in Africa and the Middle East.