MTN rubbishes Ghana’s claim of R13bn in back taxes
The mobile network provider strongly disputes the tax bill, questioning the accuracy and basis of the assessment, including the methodology used in conducting the audit.
Mobile telecommunications giant MTN has landed in hot water in another African country – this time, Ghana.
The Ghanaian tax authority says MTN owes it millions in back taxes, a claim which the mobile network provider has rubbished.
On Friday evening, in a Sens announcement, MTN advised that the Ghana Revenue Authority (GRA) had issued its subsidiary in that country, Scancom PLC (MTN Ghana) with a notice of assessment of tax liability, which suggests it owes the taxman GHS8.2-billion (about R13-billion), including penalties and interest charges, for the period between 2014 and 2018. This would suggest that MTN had under-declared its revenue in Ghana by 30% over the audit period.
In the statement, MTN said the revenue authority had used a third-party consultant as well as a new methodology based on call data records (CDR), recharges, and other data during this audit period.
“MTN Ghana strongly disputes the accuracy and basis of the assessment, including the methodology used in conducting the audit.
“MTN Ghana believes that the taxes due have been paid during the period under assessment and has resolved to defend MTN Ghana’s position on the assessment.”
The network provider said the GRA commenced an audit of MTN Ghana in 2019 to ensure the reliability and completeness of its declared revenues. The GRA, though, had failed to issue MTN Ghana with any guidelines and standards relating to the new CDR sequence-based methodology used for the audit.
“An initial tax assessment based on this new audit methodology was issued in May 2021 but was officially withdrawn by the GRA after consultations and discussions between MTN Ghana, MTN Group, the Ministry of Finance of the Republic of Ghana and the GRA. Following the withdrawal of the initial assessment, the parties agreed to an independent review by a global professional services firm.”
MTN said its Ghana office has fully cooperated in this independent review, which was commissioned by the GRA in September 2021, and the review found it was unable to support the conclusions reached by the GRA’s consultant.
The group and the country office will continue to engage with the relevant authorities on the matter and MTN “remains resolute that MTN Ghana is a tax compliant corporate citizen… with an absolute commitment to transparency, good corporate governance, and compliance”.
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MTN Ghana published its Q3 results on 31 October 2022, showing solid growth momentum in the quarter in what it called a challenging macroeconomic and operating environment, characterised by rising inflation, a weaker exchange rate and the increasing cost of fuel and utilities.
Service revenue grew by 28.3% YoY and 26.1% for Q3 2022 YoY, with voice up 22.8% due to the expansion of its subscriber base and various customer value management initiatives; while data was up by 45.2%, with an increase in active data users and usage.
It said fintech revenue growth of 10.4% was slower due to the implementation of an e-levy in May 2022 and a 25% reduction in person-to-person transaction fees, but there was some resilience in the active MoMo (mobile money) app user base (up 16.3% YoY), cash-out services (up 15.9%) and advanced service offerings (up 17.7% YoY).
As at 30 September 2022, MTN Ghana had reregistered 15.2-million subscribers, with about 5.6 million yet to complete their registration with the second phase of a government-directed biocapture, after going through the first phase of the exercise.
MTN is Ghana’s biggest mobile network provider, with 28.5 million subscribers.
This is not the first time the telecoms giant got hurt in Africa. In 2020, MTN was forced to settle a long-standing tax dispute with Nigerian authorities, after that country claimed it had failed to disconnect more than five million mobile subscribers in a clampdown on terrorist activity. In this matter, MTN agreed to pay a $53-million fine, but Nigerian authorities were accused of a shakedown of foreign companies because the economy had taken a beating over a decline in the oil price.
Once a star on the African continent, Ghana’s economy is in a lamentable state, with some suggesting it is experiencing the worst crisis in a generation: on 19 December 2022, the country suspended debt repayments of most of its external debt, effectively defaulting. Trading Economics reports that Ghana’s annual inflation was 54.1% last month, accelerating for the 19th consecutive month and up from 50.3% in November.
On 13 December, the IMF announced it had granted the country a $3-billion bailout to shore up public finances.
The currency was worth half what it was in 2021, with fuel prices doubling. BM/DM