MTN Ghana slapped with GH¢8 billion tax liability amidst protest

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MTN Ghana has been slapped with a hefty tax liability of GH¢8 billion ($773 million), which according to the Ghana Revenue Authority (GRA), is the tax component of 30% under-declared revenue by MTN from 2014 – 2018. 

The GRA served MTN Ghana with a notice of assessment of tax liability, which includes penalties and interest charges. The assessment was based on an audit by the third-party consultant as a new methodology which include the analysis of call data records, recharges and other data.

In a statement via the Johannesburg Stock Exchange (JSE) in South Africa, where MTN Group is headquartered, the African tech giant said “The base component of the assessment (that is, excluding penalties and interest), on MTN Ghana’s analysis, infers that MTN Ghana under-declared its revenue by approximately 30% over the audit period.”

“MTN Ghana strongly disputes the accuracy and basis of the assessment, including the methodology used in conducting the audit,” the group said. “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.”

Meanwhile, the tax assessment notice from GRA, came along with a 21-day temporary withdrawal “to allow for further engagement”.

Background

MTN explained that the GRA began an audit of MTN Ghana in 2019 with the “objective to give assurance on the reliability and completeness of revenues declared by MTN Ghana for the purpose of tax computation for the period 2014-2018.

The GRA had not issued MTN Ghana with any prior guidelines and standards relating to the new CDR sequence-based methodology used for the audit.

“An initial tax assessment based on this new audit methodology was issued in May 2021 but was officially withdrawn by the GRA after consultations and discussions between MTN Ghana, MTN Group, the ministry of finance of the Republic of Ghana and the GRA. Following the withdrawal of the initial assessment, the parties agreed to an independent review by a global professional services firm. MTN Ghana has fully cooperated in this independent review, which was commissioned by the GRA in September 2021.

“The independent review found that it was unable to support the conclusions reached by the GRA’s third-party consultants as the basis for the assessment,” MTN said.

MTN also stated that it will continue to engage with Ghanaian authorities, saying “MTN remains resolute that MTN Ghana is a tax-compliant corporate citizen.”

News of the tax claim comes as Ghana suffers its worst economic crisis in decades, with rating agencies downgrading the country’s sovereign debt to “junk” and the government turning to the International Monetary Fund for help. Ghana is also experiencing runaway inflation, now at above 50%/year.

Context 

The Minister of Communications and Digitalization, Ursula Owusu-Ekuful, has for a while been claiming that telcos have been evading taxes by under-declaring revenue, but had never provided a shred of evidence to support that claim until, now that this information in coming about MTN being slapped with a tax liability relating to alleged revenue under-declaration.

This comes within the context of a Ghana’s bankruptcy characterized by the government’s inability to settle its domestic and international debt. Currently, the government has introduced an obnoxious debt exchange program that has heavily depleted the investments of all institutional and individual holders of government bonds.

The Ghana government is also begging for the forgiveness of its international debt, while inching close to the US$3-billion IMF bailout.

The government had earlier banked its hopes on a controversial 1.5% electronic transfer levy (e-levy) on all moneys transferred electronically to generate billions of Ghana cedis locally to prevent an IMF bailout. But their expectations from e-levy had failed woefully so they are now back to IMF for help, while the ill-advised e-levy itself has been reduced to 1% just this month.

More tax liabilities coming?

Meanwhile, Techgh24 has also gathered that GRA is also pushing to get all telcos in the country to pay taxes on outbound international roaming tariffs, in defiance of ITU regulations, which require taxes on international roaming fees to be charged by the receiving country and not by the originating country.

That matter is currently in court and that also threatens to slap another billions of Ghana cedis in international roaming taxes on MTN and all other telcos if the court rules in favour of GRA.

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