The Deputy Minister Finance Minister has defended the decision by government to incorporate the Agyapa Minerals Royalties Limited in Jersey.
Charles Adu Boahen said the move is tax-efficient and will see the shareholders getting the best out of the transaction.
The new agreement will enable the country to use a Special Purpose Vehicle (SPV), Agyapa Royalties Limited, to secure about $1 billion to finance large infrastructural projects.
But the arrangement has been vehemently resisted by the Minority on the grounds of what they say are ulterior motives by government underpinning the promotion of the deal.
Some 15 Civil Society Organisations have also demanded a suspension of the agreement until all necessary documents have been disclosed.
The incorporation of the company in Jersey, which is a tax haven has come under criticism with some describing it as shady adding that it sets the tone for the deal to be shredded by corruption.
Executive Director for the Africa Centre for Energy Policy, Benjamin Boakye is one of those who believe the destination of incorporation sends a bad signal.
“So you have a country that is deciding to go and hide and do business. Beyond it being possible and legal for you to register and do business in a tax haven, there are more questions to be asked when a country decides to go and hide in a tax haven,” he said on Top Story August 25.
Reacting to these concerns at a press briefing Thursday, Charles Adu Boahen explained that the decision to establish the company in Jersey will inure to the benefit to Ghana through the maximisation of value for investors.
Describing the opinions as unfortunate, the Deputy Minister explained that “anybody who thinks that we are using for something naughty, he himself knows why he thinks that.”
“We used it because it was a tax-efficient avenue to use. If we had decided to use transfer the royalties to Agyapa that was domiciled in Ghana, We would have ended up in a situation where we would be paying tax twice.”
He further explained that; “The royalty flows itself is in a tax. It would have come to Agyapa as a company incorporated in Ghana as a revenue stream. It will then come out as an income, profit after tax.
“So that profit will be taxed before you get your net income which will then come out.”
“By routing it through Jersey, the 100% comes in and goes out as the same hundred less whatever operating expenses there, there are no taxes. Which means that the shareholders are getting the full benefits of that 100% of royalties.”
“It also means that the valuation of the companies will be 25% higher than if this was domiciled in a tax jurisdiction,” Mr. Adu Boahen added.
The agreement said to be in line with the Minerals Income Investment Fund (MIIF) Act, 2018 (Act 978), was passed without support from the Minority in Parliament.