Ghana warned against dangers of offshore banking

Ghana has been warned strongly to be ware of the risks of becoming a tax haven with the establishment of offshore banking in the country.

The Organisation for Economic Co-operation and Development (OECD) which issued the warning is asking the country to ensure that by becoming a tax haven, the country does not fuel corruption and crime in West Africa, The Guardian reports.

Forbes reports that in June, 2005, Barclays Bank signed a memorandum of understanding with the Government of Ghana to help develop an offshore haven called The International Financial Services Center.

A concept paper for the Ghanaian government was commissioned by Barclays and produced by the bank’s consultant, Grant Thornton Mauritius. In June, 2006, Ghana’s government signed off on the recommendations, authorizing Barclays and its consultants to develop the proper legal framework, which Ghana’s parliament passed into law the following year.

Forbes also indicated that in September 2007, Barclays Bank Ghana Offshore Banking Unit became the first and only such operation in North and West Africa, according to the bank’s own press release. An additional law, to expand the regulation so other financial institutions can follow Barclays’ lead, was expected to be enacted in 2009, according to Wilson Prichard of the The Institute of Development Studies at Sussex University.

Prichard and others believe that Ghana’s offshore banking center, next door to oil-rich Nigeria, could do terrible economic damage in the region, as Africa’s wealthy use it to further reduce taxable income in their own impoverished nations.

The head of the Organisation for Economic Co-operation and Development (OECD), Jeffrey Owens said, “the last thing Africa needs is a tax haven in the centre of the African continent.”

According to The Guardian, Ghana wants to become a West African financial hub, taking advantage of its emergence as an oil producer. This year the first of Ghana’s 3.2 billion barrels will begin to flow from its waters.

The OECD, the report said is in talks with Ghana to guarantee the country “adheres to the highest standards and integrity”. Owens was quoted as saying that Ghanaian officials “are aware of the risks they are running”.

“Aside from the general social costs associated with the operation of tax havens globally, in the absence of a very strong regulatory framework and very strong standards of transparency there’s a particularly high risk that a tax haven in west Africa, which is home to major oil wealth and high levels of corruption, could facilitate large-scale corruption and tax evasion, and pose a correspondingly large risk to good governance and economic growth in the region,” Wilson Prichard, a researcher at the Institute of Development Studies who has closely followed Ghana’s development as an offshore centre was quoted as saying.

By Emmanuel K. Dogbevi