Transfer pricing is the selection of prices to place values on transactions between entities in a legal environment within the same multinational enterprise (MNE). These are referred to as “command” or “intra-group” transactions, and may include the buying or selling of tangible and intangible assets, service provisions, financing of projects, allocation of cost, and expenditure sharing agreements. Ghana has been losing huge sums of money to multinational enterprises due to transfer mis-pricing and the following recommended measures can help address some of the challenges.
Making a submission at the forum held in Accra, Mr. Edward Gyamerah the Deputy Commissioner in charge of Policy Programs at the GRA said ” Ministry of Finance should review the potential inconsistencies between Section 31 of the new Income Tax Law, and the 2012 Transfer Pricing Regulations.
“Specifically, clarification is required as to whether the arm’s length principle is to be applied to individual transactions as per the regulations, or to the calculations of total chargeable income at the end of each year” he added.
The Ministry of Mines and the Ministry of Petroleum should amend the Minerals Act 2006, and the Petroleum Income Tax Law, requiring the arm’s length principle to be applied to all related party transactions, with particular emphasis on deductible expenditure. The Ministry of Finance should include advance pricing agreement (APAs) in the transfer pricing regulations.
While the GRA is hesitant to enter into APAs (having only recently started working on transfer pricing) many other countries in the region, similarly reluctant, have included APAs in their regulations for future use.
If properly negotiated with support from technical experts, APAs provide an opportunity for the GRA to develop their expertise in transfer pricing and gain access to valuable information from taxpayers.
The Ministry of Finance should amend the new Income Tax Law, which is still open for comment, to include beneficial ownership disclosure requirements.By requiring disclosure of beneficial owners, the government will be in a better position to determine related party arrangements, as well as limiting the new practice of “round-tripping”.
In conclusion, the Ghana Revenue Authority can realise the full potential of revenue from the extractive sector when the necessary legal frameworks are in place to enable them check effectively for transfer mis-pricing.
By: David Aduhene Tanoh-www.penplusbytes.org