The extractives sector plays a crucial role in revenue generation for countries, especially where tax collection is effective.
Countries that have lax tax collection systems and regimes that tolerate opaque ownership structures facilitate the syphoning of public money, conflicts of interest and tax evasion.
The Africa Centre for Energy Policy (ACEP) has developed manuals for beneficial ownership disclosure, Petroleum Revenue Management and Petroleum Contracting for the upstream oil and gas sector.
A Policy Analyst at ACEP, Linda Ahunu, during a presentation on Beneficial Ownership, indicated that developing countries lose US$1trillion yearly due to corrupt deals mainly involving companies without clear ownership.
She said Africa loses more than US$50 billion every year from fraud and tax avoidance.
Linda Ahunu added that in Ghana nearly US$2.1 billion dollars is lost to tax evasion annually by corporate groups, individuals, multinationals and other organisations operating in the country.
She indicated that our opaque systems allow for politicians to award contracts based on political connections or divert public funds through corrupt deals mostly to companies established by them secretly.
On how extractive companies conceal their beneficial owners, she noted that Companies can have opaque and complex ownership structures, with ownership shares held, directly or indirectly, by other companies, private trusts or through private agreements allowing one person to hold shares on behalf of another.
“Companies can make use of legal ownership to hide persons who exercise ultimate control over an entity and enjoy from it, profits and other benefits,” Linda stated.
She explained that whereas a legal owner may be a person or company listed in a company’s corporate registration, licenses or contracts as direct owners, a beneficial owner refers to a person who may not necessarily be a legal owner, but exercises significant influence over and receives profits from a company.
Linda Ahunu said this at a stakeholders’ engagement workshop on petroleum contracting, petroleum revenue management and beneficiary ownership in Ghana at Tomriek Hotel in Accra.
Beneficial Ownership Manual
According to her, the concept of beneficial ownership remains quite an enigma as there has been very little public education on the subject.
She intimated that the Beneficial Ownership manual is prepared to serve as a guide to help government, citizens, industry players, private enterprises and all other relevant stakeholders grasp the concept of beneficial ownership in Ghana’s extractive sector.
“With a user-friendly format, it attempts to address key questions bordering on ownership transparency and some of the myths that usually curtail the implementation of beneficial ownership,” she emphasized.
Linda Ahunu added that beneficial ownership information is needed to tackle issues of tax evasion, money laundering and the different forms of corruption that is usually made possible by the complex ownership structures of some companies.
“Typically, if the disclosure of BO is not effectively implemented, it would result in loss of huge sums of money and other investment costs to the state,” she stated.
Linda Ahunu posited that Ghana has demonstrated some amount of commitment towards implementing beneficial ownership.
She indicated that the Ghana Extractives Industries Transparency Initiative (GHEITI) has played a crucial role, developing a Beneficial Ownership Implementation Roadmap in 2016 and working with civil society groups and the Registrar General’s Department (RGD) to implement Beneficial Ownership.
Linda noted that Ghana’s key efforts include the amendment of the Companies Act, 1963 (Act 179) and the establishment of a central beneficial ownership register.
The challenge with implementation of beneficial ownership, according to her, is the financial constraint of the RGD to make the Central Register publicly available at no cost. This is primarily because fees paid for such data is a major source of revenue for the RGD.
She recommended for the development of a beneficial ownership implementation framework which must outline the roles and responsibilities of the stakeholders relevant for its implementation.
Linda Ahunu urged government to pass separate beneficial ownership regulations to cater for the entire extractives sector, including solid minerals and other sectors as well.
According to her, government must provide limited case-by-case exemptions for individuals at provable risks and should be done based on their unique characteristics and specificities rather than blanket exemptions.
She concluded that government must apply sanctions to defaulters in accordance with Section 32 (15) of the Companies (Amendment) Act, 2016 (Act 920).
Source: CBOD News