Last week the Ghana Revenue Authority (GRA) threatened to close the offices of Vodafone Ghana, according to Pulse.com.gh. Tax officials reportedly ‘stormed’ the headquarters of Vodafone Ghana and a second office building, in a bid to resolve what has subsequently been described as a ‘miscommunication’. Apparently the situation arose because of a lack of coordination between the GRA and Ghana’s Ministry of Finance, and related to the status of Vodafone’s liabilities and the government’s investment in Vodafone Ghana.
The government retains 30 percent ownership of Vodafone Ghana. It sold 70 percent of the erstwhile Ghana Telecom to Vodafone Group in 2008 for a price of USD900m. That deal prompted some criticism in Ghana. One writer stated that giving up government control had the potential to “threaten national security” and that…
…it is clear the whores and vultures of international big business are celebrating a good hunting day on the carcass that the… government has delivered.
There was a change in government a short while later. This resulted in accusations that the deal with Vodafone had been “unconstitutional and illegal” and that the new government should negotiate a higher price. However, this ignored the fact that the weakening of the Ghanaian economy had already prompted Vodafone Group to write off more than half of the value it had paid for its controlling stake in Ghana Telecom. In effect, Vodafone shareholders already knew a lot of their money had been lost because they had bought a telco which was worth considerably less than they paid for it.
Tax authorities need to do their job, for the good of the nation they serve. However, some African governments and tax collectors have an unenviable reputation for maliciously pursuing telcos in a way that is not common elsewhere. Based on my experience, multinational telecoms groups like Vodafone can usually be relied upon to promote corporate ethics around the world. This is supported by a straightforward observation about the expected rates of return on different kinds of investment. If given the choice between investing in Ghanaian government bonds, or an international telecoms group like Vodafone, investors have no doubts over which organization is more reliable. That is hardly surprising when governments cannot be relied upon to interpret their own laws consistently, and fail to communicate effectively with big businesses – or with their own tax inspectors!
Dramatic raids and populist sloganeering seem designed to portray telcos as the enemy of ordinary people, always cheating on taxes and exploiting their customers. But electronic communication is key to modern business. Telcos bring significant infrastructure investment, plus they train many people in advanced technology. It is wrongheaded of governments to demonize telcos, and foolish for tax authorities to behave like every telco is crooked. If tax inspectors are not competent to conduct straightforward tax audits without creating a ‘storm’ over nothing, then governments should sack the bureaucrats and train replacements who can do the job properly. Business people want predictability. They do not want to be hectored, blamed, abused, and threatened with closure, as a way to repeatedly extort more money from them. If governments do not learn this lesson, they will only succeed in depressing their tax revenues because they will scare away vital investment in their country.