Ghana: a new tax haven? a good idea?

No one doubts that Ghana is one of the Africa’s most stable and democratic countries on the continent, and one with the excellent future prospects in terms of economic growth. All of this can be seen in the fact that, for the past few monts, Ghana has mostly been in the news for good reasons: first, the elections held in January last year, were not only extremely fought and exciting, but also resulted in a peaceful transfer of power from the ruling NPP to the new President John Atta Mills, of the NDC. Later last year, President Obama chose Ghana as his first state visit to Africa. Furthermore, the discovery of off-shore oil in various locations of its coas may signal a new and important source of income.
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Slogans and campaign colours line Ghana’s streets. (Peter Lewenstein) (Flickr/BBC)

On this last point however, it is necessary to highight the mixed blessing that finding natural resources can sometimes be, for often finding oil in countries whose government is not as transparent as it may be desired turns out to be a source of worries – a “resource curse” as some have chose to label it. Uganda, for example, finds itself in a similar situation. I doubt however that this may be the case in Ghana, given that, as we have pointed out it is a stable and well-governed country, but extra-care when dealing with these sort of topics, is never a bad idea. In fact, some undesirable consequences that may derive from Ghana’s oil findings and its emergence as a leading west african economy were pointed out in an interesting article in the Guardian on Tuesday. The article reports on the OECD warning that the Ghanaian government’s decision to become an offshore financial centre, with the help from Barclays Bank, may have a negative impact. “The last thing Africa needs is a tax haven in the centre of the African continent”, said Jeffrey Owens, head of the OECD’s Tax Centre. Similarly, Wilson Prichard also pointed out that: “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…could facilitate large-scale corruption and tax evasion, and pose a correspondingly large risk to good governance and economic growth in the region.”

These are all important arguments against the decision, to which I would add my own hostilty to tax havens (everywhere) given the harmful role they play within the international economy, allowing for tax evasion and capital flights (which mostly affect poorer countries). Furthermore, the current economic thinking, after the financial crash that led to the current economic crisis, favours greater economic regulation and is openly hostile to tax havens. For this reason it seems important not to over-stress the fact that Ghana’s mobe would be a negative one because it is in Africa.
It is the very nature of tax havens and their lack of transparency, that allows for corrupt practices to appear – not the fact that this would be an African tax-haven, Let’s remember that one of the most important tax-haven is Switzerland, right at the centre of Europe. Clark Gascoigne, in the Financial Task Force blogs, puts this accross succintly: “Just because Switzerland doesn’t physically border an African country doesn’t mean that it’s not facilitating corruption within Africa. Indeed, quite the country is true. Just consider the case of Mobutu from the DR Congo. It’s great that the OECD now wants to make the connection between corruption and financial secrecy. However, they can’t pretend that this is only a problem in Africa.” .

This is, for me the key aspect to this debate. Taxes are a crucial element to any country’s economic development and progress. And the decision to chose one or another tax regime corresponds only to the government and the population of the country – in this case Ghana. Taxes are also (boring as it may sound), a fascinating topic – of which I know next to nothing but I’d like to know more about. And looking for more information on takes and Africa for this post I have just learn about the Tax Justice Network for Africa (TJN-A), a pan-African initiative launched at the World Social Forum in Nairobi in January 2007, which: “aims to promote socially just, democratic and progressive taxation systems in Africa. We advocate for tax systems which are favourable to the poor and finance public goods. We challenge harmful tax policies and practices which favour the wealthy and which encourage unacceptable inequality.” The TJN-A, is part of the Tax Justice Network (their blog is here), and has just launched its first newsletter – which can be accessed online, as a pdf). This, no doubt, is an extremely interesting and necessary initiative which I am looking forward to know more about.

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