Experts Say, Interest Deductibility Shrinks Ghana?s Petroleum Revenue

There is the need to put restrictions on Interest Deductibility in petroleum contracts between the government of Ghana and International Oil Companies (IOCs), experts urged here?on Monday.
?? They said this was important to enable the country earn better revenue than it currently receives from the oil produced from its Jubilee oil fields.
?? Executive Director for African Center for Energy Policy (ACEP) Mohammed Amin Adams made this call during the launch of ACEP?s latest report on Ghana?s oil sector.
?? The report, ?Between a Blessing and a Curse: The State of Oil Governance in Ghana? tackled issues bordering on fiscal governance, contract governance and institutional governance, with recommendations for the government.
?? The report recommended that the new Tax Avoidance policies be introduced; including restrictions on interest deductibility; application of Profit Split to strengthen the Arms Length principle in the law; as well as setting up a register for the publication of information on the subsidiaries and affiliates of all IOCs incorporated Tax Haven and security jurisdictions.
?? The Executive Director explained that the reason for this proposed law is that, some of the oil companies which are subsidiaries of other big international companies take loans from their mother companies or subsidiaries, which they invest into oil development activities in Ghana.
?? At the end of the day, the borrowing subsidiary pays back to its mother company with huge interests, leaving very little profit for sharing.
?? ?The Jubilee field was developed on debt instruments amounting to about six billion U.S Dollars, while the TEN (Tweneboa, Enyenra and Ntomme) Project would also be developed on such debt facilities to the tune of over five billion dollars,? Adam, an energy economist intimated.
?? He added: As long as such a regime persists, international oil companies would continue to cheat Ghana and other West African oil producing countries.?
?? Ghana received 444 million dollars in oil revenue in 2011 and 541.83 million dollars in 2012, but Adam held that the country could have earned more, but for the Interest Deductibility regime being practiced.
?? Another way of checking this, he said was to introduce the Thin Capitalization rule which limits how much debt financing can be done by partners in the oil business.
?? On his part, Richard Hato-Kuevor, Extractive Industries Advocacy Officer for Oxfam said for Ghana to develop and have a better future, there was the need to protect its natural resources, and use them judiciously for the development of the country.
?? He said, since the mining sector did not live up to expectation, the oil sector needs to be protected, and made to achieve the goals set for it.
?? ?The extent to which the oil sector is expanding, we need to carry the masses with us, and make them able to hold leaders accountable, to ensure that the ?resources are used judiciously for the benefit of all citizens,? Hato-Kuevor urged. Enditem.
?? Source: Justice Lee Adoboe
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