April 2, 2024
SUPREME COURT
GHANA
CORAM
AI Generated Summary
The Supreme Court of Ghana, per Amadu JSC with Asiedu JSC concurring and Gaewu JSC joining, allowed Maersk Drillship IV Singapore PTE Limiteds appeal against a Ghana Revenue Authority tax assessment totaling US$28.357 million arising from services rendered under the Offshore Cape Three Points (OCTP) Petroleum Agreement. The Court held that Article 12 of the Petroleum Agreement and its freezing stabilization clause in Article 26.2, ratified by Parliament, strictly limits taxes on the contractor and its subcontractors to those expressly set out, notably a final 5% withholding tax under Section 27 of PNDCL 188. Consequently, additional Corporate Income Tax and Branch Profit Tax imposed under the general tax laws (Act 896 and Act 592) were inapplicable. The Court emphasized strict construction of tax laws, vested rights, and the constitutional bar on retroactive burdens. It ordered GRA to revise assessments for 20152017 and refund any excess. Chief Justice Sackey Torkornoo, joined by Justice Darko Asare, dissented, favoring application of Act 896/Act 592 to repatriated profits.
TANKO AMADU JSC:
My Lords, the instant appeal has arisen out of a dispute over the assessment and imposition of tax from petroleum operations. In its simplest definition, tax is a compulsory levy imposed by the State on an individual or an entity for public purposes. The taxman and the taxpayer are two persons of significant interest to the State. Their common point of interest, is income generation or revenue for the State. While the taxpayer is expected to contribute to the development of the State through the payment of specified taxes, the taxman is enjoined to pursue the taxpayer to ensure compliance with tax obligations, albeit within specially structured and regulated mechanisms provided by law.
Tax law is one area of law where enforcement and interpretation of regulatory provisions command strict construction. Under our constitutional and legislative regimes, unless the legislature or such other person empowered by the Constitution and relevant statute sanctions the payment of taxes, or exemptions from payment, no person can deviate nor evade compliance. Any deviation or evasion will attract enforcement and potential sanctions as provided by regulating statutes. Therefore, in any adjudication regarding issues of tax, the adjudicator must confine himself to the law which imposes or dispenses with the element of tax. Upon ascertainment, the statute must be strictly construed and enforced.
Baring the abuse of the rights of individuals regarding tax obligations, as well as the attempt by persons to evade their tax obligations, the legislature has carefully delineated a legislative framework to address compliance. What this simply means is that, the tax officer does not wield unregulated power in the administration and enforcement of tax laws. The powers invested in the officer are statutorily and procedurally limited, and hence, any unfair application inconsistent with due process must not be countenanced.
At the heart of the instant appeal therefore, is an invitation to this court to balance two cardinal principles of tax and investment law. First, that tax can only be imposed or waived under a legislative fiat and second the principle of pacta sunt servanda as pertains to Petroleum Agreements. How does the court balance a Petroleum Agreement ratified by Parliament which contains a stability clause that seeks to guarantee the stability of the contractual and fiscal frameworks of the agree