Ghana lost a potential $70 million in the petroleum upstream sector from the two untaxed acquisitions involving the EO Group and Kosmos, and Sabre Oil and PetroSA who exploited a loophole in the country’s tax laws.
The oil companies did not pay capital gain tax, payable when an entity makes an acquisition, because of an inconsistency in the Internal Revenue Act 2000 (Act 592) and the Petroleum Income Tax Law (PNDC Law 188).
Although the tax is required of parties that make acquisitions by Act 592, the Petroleum Income Tax Law (PNDC Law 188) is silent on capital gain tax, which oil companies interpret as their exemption from the tax.
All advocacy in the past to get Parliament to plug the loophole and come clear on capital gain tax in the petroleum industry fell on deaf ears, Dr Steve Manteaw, Chairman of the Civil Society Platform on Oil and Gas, said today November 23, 2015 during a two-day Africa Oil Governance Summit in Accra .
As a result, the EO Group, a local oil company held by Bawuah Edusei and George Owusu, believed to be related to former President J. A. Kufuor and the New Patriotic Party, sold its 3.5 per cent stake in the West Cape Three Points offshore block which it had acquired in unexplained circumstances, to Kosmos Energy – a deal which went untaxed by government.
The problem was not addressed by Parliament after this incident.
In similar deal, the South African national oil company PetroSA came under investigation in 2013, after it had, in a shady deal, acquired Sabre Oil which had a four per cent stake in the West Cape Three Points block and 1.85 per cent in the Deepwater Tano block.
The two deals attracted displeasure from civil society organizations such as the Integrated Social Development Sector (ISODEC) and the Africa Centre for Energy Policy (ACEP), after which the then Attorney General Martin Amidu disclosed that Kosmos and EO were going to be prosecuted.
However, some reports say the government decided not to prosecute the two, opting instead for $15 million in reparation from each company.
By Emmanuel Odonkor
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