Transfer Pricing (TP) Rules, Procedures and Documentation: A perspective on Ghana

Our primary claim in this paper is that the legal rules pertaining to transfer pricing in Ghana are potentially effective but there exists inherently weak links within the general tax system that may undermine success and sustainability. This predicament provides a little systemic muscle or institutional mechanism for the recovery and retention of revenue to the state. Multi-national corporate bodies have seen this as an economic valve to erode the efforts of the state in tax collection. This basic predicate of the paper is built on the idea that the legal tax regime in Ghana fails to adopt an approach to transfer pricing that recognizes the peculiar circumstances of the Ghana Revenue Authority (GRA) and also that the discretion the Commissioner General of the GRA has in such matters might be an avenue for abuse. This is exacerbated by weak human resource capacity of the institutions responsible for tax collection in the country and in particular, adequate trained personnel on transfer pricing are inadequate. Above all, there is lack of certainty in respect of the methodology usually deployed in the few selected cases for calculating the liability of a person on transfer pricing. There is no reliable database for comparables on the account of which taxpayers liability on transfer pricing are calculated. This gap sometimes leads to delays and arbitrary decisions on the part of tax officers. It is thus suggested that appropriate targeted legislative and administrative measures are required to bring the tax regime of Ghana on transfer pricing up to date and to facilitate efficiency in revenue mobilisation through effective tax administration in the country. It is also recommended that the Ghana should take a second look at its current transfer pricing methods and adopt a simplified approach that ensures a more effective use of resources.