Accra, – Ghana Integrity Initiative (GII) has launched a study report on the dangers of the Double Taxation Agreement (DTA).
The report recommends African countries be self-reliant in financing their development.
The report, based on a case study of South Africa and the United Kingdom, was aimed at demystifying the policy logic behind the increased signing of various tax treaties in Africa; when some of the existing agreements have been a subject of abuse.
Mrs Linda Ofori–Kwafo, GII Executive Director, launched the report dubbed “Dangers of Double Tax Agreement in Financing development, a case study in Ghana.”
She said the study was done in collaboration with Tax Justice Network Africa (TJNA) and with support from the Open Society Foundation (OSF).
She said the overall objective of the launch was to create a platform for the dissemination of the financing development in Ghana and to create a forum for a broader discussion on the implications of DTAs on Ghana’s Domestic Revenue Mobilization (DRM).
She indicated that efforts of African countries to be self-reliant had been full of challenges, ranging from issues of tax evasion, tax avoidance to Base Erosion and Profit Shifting (BEPS), which had resulted in African countries relying on foreign aid, grants, and excessive borrowing for financing their development.
Mrs Ofori-Kwafo explained that these challenges had been attributed mainly to issues of poor tax administration systems, poorly drafted and negotiated double tax treaties.
She said most Double Taxation Agreements adopted in Africa were negotiated based on the Organization for Economic Co-operation and Development (OECD) and United Nations models.
She said the OECD models were mainly developed with the interest of developed countries in mind, saying the UN model was developed as an alternative that may be adopted by developing countries.
She also said in a bid to curb some of the challenges, the Africa Tax Administration Forum (ATAF) developed a DTA model that is poised to propose a universal DTA negotiation tool for African countries, adding that it would also help the continent when negotiating with other states.
She noted that several studies had indicated that the structure of existing tax treaties had been propagators of treaty shopping, round-tripping, base erosion, and profit shifting which had highly affected various countries’ efforts to raise the highly sought revenue to finance development.
“For example, countries like Uganda have suspended negotiations of new tax treaties until there are clearer guidelines on how the country should benefit from such agreements, other countries like Rwanda have resorted to renegotiate some of the existing DTAs with a view of managing the above-identified vices,” she stated.
Mr William Kofi Owusu Demitia, Tax Consultant, who represented Dr Abdullah Ali-Nakyea, Tax Consultant and a Lecturer at the University of Ghana, said the study was limited to permanent establishment, dividend, interest, royalties, and management keys, which were critical components and had a direct impact on the domestic tax base of the treaty partners.
He said Ghana must develop a comprehensive plan to build the capacity of people who would negotiate tax treaties on behalf of the country.
Source: Ghana News Agency