Ghana lost $70m to EO Group & Sabre

Ghana has lost a colossal US$70 million in revenue in two oil deals involving New Patriotic Party sponsored firm, the EO Group and Sabre Oil, Chairman of Civil Society Platform on Oil and Gas, Dr. Steve Manteaw has revealed. The lost in revenue according to Dr Manteaw was as a result of non-payment of taxes in the transfers in 2011 of EO Group’s 3.5 percent stake in the Jubilee Field to Tullow Oil and Sabre Oil’s sale of its 4.05 percent share in the field to South Africa’s national oil company, PetroSA. This unfortunate development at a time government is exploring innovative ways of raising needed financial resources to finance its budget, was as a result of lacuna in the Petroleum Income Tax Law which, according to Dr Manteaw is in conflict with the General Income Tax Act (Act 592), which imposes and mandates the payment of 10 percent Capital Gains Tax on the trading of capital assets. According to Dr Manteaw, since in law, specific laws like the Petroleum Income Tax Law takes precedence over general laws, such as Act 592, which was deemed inconsistent with the Petroleum Income Tax Law at the time, EO Group and Sabre Oil took advantage of that and dispose of their assets without paying tax to the Government of Ghana. Sharing his thoughts on the 2014 budget on an Accra based radio station, Radio Gold last Wednesday; Dr Manteaw was extremely delighted that the Mills/Mahama-led administration had taken steps to pass the Petroleum Revenue Management Act, adding that if such measures had been taken in the past, the country would not have been shortchanged in the two oil deals. A recent statement issued by the Civil Society Platform on Oil and Gas signed by Dr Manteaw stated that “Unconfirmed reports say the [Sabre-PetroSA] deal was worth something in excess of US$365 million, meaning Ghana must have lost at least US$36.5 million. Combined with the revenue lost in the EO Group-Tullow transaction, Ghana is losing approximately US$67 million for lack of action on the PITL Amendment bill,” He said now that the Petroleum Revenue Management Act is in operation, it is expected that provisions in it will be followed to the latter to ensure that the interest of the country is protected in similar transactions in order to rake in enough revenue for the country. The EO Group led Kosmos Energy and other partners to the Jubilee oil field to start oil exploration off the coast of Cape Three Points in the Western Region, and subsequently secured for themselves 1.75% shares in the fields. For unknown reasons, in 2011, the EO group disposed its 1.75% shares in the field to Tullow oil worth some US$305 million, which if the country had applied 10 percent Capital Gained Tax mandated by General Income Tax Act (Act 592) on the transaction, it would have gained US$30.5 million as revenue. Though as at the time of the transaction, the Ghana Revenue Authority ruled the transaction was subject to tax, the Ghana Extractive Industry Transparency Initiative in its final report on the reconciliation of oil and gas sector payments and receipts; 2010-2011, said it did not come across any capital gains tax on the transaction, therefore asked the GRA to pursue the issue of capital gains tax on the E.O Group’s 1.75% equity sale in the Jubilee partnership, and other such acquisitions to their logical conclusion. This, Dr Manteaw said made it possible for Sabre Oil, which was also engaged in a similar transaction to potentially get away with an undisclosed sum in receipts for sale of its 4.05 percent share in Tullow to South Africa's national oil company, PetroSA. He said with the ‘new’ Petroleum Revenue Management Act, Act 815 section 6(e) which indicates that capital gains tax derived from the sale of ownership of exploration, development and production rights as a possible receipt for the petroleum holding fund, no oil company engaged in transactions will take solace in a disparity between two conflicting laws to invade tax. continued