The Ghanaian government has imposed a $773 million fine on MTN Ghana for ‘deceitfully’ underpaying its taxes in four years, a move that has been widely seen as a ploy to generate revenue by the cash-strapped country.
MTN said the back-tax bill, which includes penalties and interest charges, covers between 2014 and 2018, when the company allegedly under-declared its revenue in Ghana by 30%, according to the notice it received this week.
Africa’s largest wireless network said it believes the taxes were paid and intends to contest the penalties.
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“MTN Ghana believes that the taxes due have been paid during the period under assessment and has resolved to vigorously defend MTN Ghana’s position on the assessment,” the company said.
It added that the Ghana Revenue Authority used a third-party consultant as well as a new methodology.
“MTN Ghana strongly disputes the accuracy and basis of the assessment, including the methodology used in conducting the audit,” the company said.
But MTN has been here before. In 2018, Nigeria’s Attorney General, Abubakar Malami, accused MTN Nigeria of failing to pay $2bn in taxes and penalties. MTN contested and won the case after it was withdrawn in 2020.
However, the tax bill from the Ghanaian tax authority is believed to be born from desperate need to fill its empty treasury. Ghana’s economy took a drastic downturn with its currency, cedis, ranking as the world’s worst-performing currency last year. The West African country’s inflation rate has risen 54.1%, making means of living unaffordable.
In December, Ghana announced it’s suspending payments on most of its external debt, including its Eurobonds, commercial loans and most bilateral loans, in a decision the country described as an “interim emergency measure.” This is despite securing a $3 billion financing agreement with the International Monetary Fund.
Other measures the nation has adopted to tame its economic crisis include a strategy it announced in November, that will see the nation buy oil products using gold rather than U.S. dollar reserves. The plan is to protect Ghana’s foreign exchange reserve from declining further due to intense pressure from dollar demand by oil importers.
Ghana’s economic outlook is projected to slow in 2023, compounding its challenges. Against this backdrop, there is belief that MTN Ghana is being scapegoated with the back-tax bill.
MTN said in the statement that it is working with GRA to resolve the matter. It said the tax agency had begun an audit of its Ghanaian business in 2019 to look into the “reliability and completeness” of the revenue it declared during the five-year period, according to Bloomberg.
“The GRA hadn’t issued the unit with any guidelines or standards relating to its new audit methodology,” MTN said.