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Ghana too strategic for MTN to scuttle its operations

By , Portals editor
Ghana , Nigeria , 17 Jan 2023

Industry pundits believe operator and revenue authority will negotiate a solution.

Ghana is a highly strategic region in terms of MTN’s West African ambitions and it is unlikely that the market will witness a saga like the one that played out in Nigeria over the past few years.

MTN Group and its Ghanaian operation released a statement this week in which it refuted a claim by the Ghana Revenue Authority (GRA) that the company owes US$773-million in back taxes.

According to the statement, the GRA issued Scancom PLC (MTN Ghana) with a notice of assessment of tax liability and said “MTN Ghana under-declared its revenue by approximately 30% over the audit period.”

In this regard the GRA also issued a temporary withdrawal of the notice of the assessment on 13 January 2023, providing a 21-day timeline to allow for further engagement.

The statement reads, “The assessment was for an amount of approximately GHS8-billion (approximately US$773-million at current exchange rates), including penalties and interest charges.”

“The GRA audited MTN Ghana for the period 2014-2018 and used a third-party consultant as well as a new methodology based on call data records (CDR), recharges, and other data. MTN Ghana strongly disputes the accuracy and basis of the assessment, including the methodology used in conducting the audit,” it continued.

According to background information supplied by MTN, the GRA commenced an audit of MTN Ghana in 2019 with the objective to give assurance on the reliability and completeness of revenues declared by MTN Ghana for the purpose of tax computation for the period 2014-2018.

The GRA had not issued MTN Ghana with any prior 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An initial tax assessment based on this new audit methodology was issued in May 2021 but was officially withdrawn by the GRA after consultations and discussions between MTN Ghana, MTN Group, the Ministry of Finance of the Republic of Ghana and the GRA.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 Ghana said it has fully cooperated in this independent review, which was commissioned by the GRA in September 2021.

The independent review found that it was unable to support the conclusions reached by the GRA’s third-party consultants as the basis for the assessment.

Compliant corporate citizen

The MTN Group and MTN Ghana affirmed they will continue to engage with the relevant authorities and are resolute that “MTN Ghana is a tax compliant corporate citizen.”

MTN added: “MTN Group would like to further assure its shareholders and other stakeholders that MTN Ghana is a responsible business with an absolute commitment to transparency, good corporate governance, and compliance. MTN Ghana, one of the largest private sector taxpayers in Ghana, has been recognised on numerous occasions for its support of the GRA’s revenue mobilisation efforts. The GRA has also satisfactorily concluded multiple tax assessments on MTN Ghana over many years, and presented MTN Ghana with various taxpayer awards in recognition of its contribution to the fiscal development of the country. MTN will continue to update shareholders, as appropriate, on any material developments on this matter.”

Africa analyst and scenario strategist Koffi Kouakou cautioned that it while the situation is somewhat suspicious - given that the Authority made information public quickly, it cannot be assumed to be the same scenario as that which occurred in Nigeria.

“We say ‘two is a trend, so don’t wait for a third one’. But we need to find out what the details are,” said Kouakou.

He added that undeclared revenue remains a thorn in the side of many governments and some companies are using that vulnerability to make extra money.

Kouakou said that Ghana, like Nigeria, is a cash-cow for MTN and the company continues to experience growth in the region.

According to Kouakou information currently in the public domain sways towards MTN, but the operator needs to be careful of trying to dominate the narrative because although the GRA may have released information quickly (and indeed put itself under scrutiny), the country has significant debt and the regulator is thorough in its effort to secure and utilise revenue.

Kouakou is confident the two parties will reach agreement. “West Africa is growing fast, the market is huge and highly strategic for MTN. The company is playing a good game in Ghana and the entire region. It’s a lucrative market that MTN cannot afford to lose. There’s no way MTN Ghana is going to leave precipitously, there’s no way that is going to happen.”

In August last year Ralph Mupita, MTN Group CEO, said Ghana – like Nigeria, South Africa and Uganda – performed strongly (especially in terms of Fintech and data) to help the Group sustain growth.

Mupita said, “Growth in data revenue was particularly strong, up 35.9%, driven by MTN Nigeria, MTN Ghana, MTN Cameroon and MTN South Africa,” adding that Fintech revenue grew by 14.0%, with solid performances from Nigeria, Uganda and Ghana.

“The introduction of Fintech taxes in some markets slowed revenue growth in Q2, but we remain encouraged by the ecosystem growth as users, agents and merchants continued to grow healthily during the period under review, with transaction volumes growing by 31.5% during the period.”

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