2024
SUPREME COURT
GHANA
CORAM
AI Generated Summary
The Supreme Court, by majority, allowed Maersk Drillship IV Singapore’s appeal against a US$28 million tax assessment. It held that the 2005 Offshore Cape Three Points Petroleum Agreement, ratified by Parliament, contains a fiscal-stability clause that freezes the tax regime for the contractor and its subcontractors. Articles 12 and 26, read with sections 27 and 39 of the Petroleum Income Tax Law 1987, limit the appellant’s liability to a final 5 % withholding tax on payments received for petroleum-related services. Consequently, the Ghana Revenue Authority acted ultra vires in imposing corporate income tax, branch profit tax, PAYE penalties and VAT adjustments calculated under later general tax statutes. The Court set aside the assessments and ordered a revised computation confined to the agreed withholding tax and a refund of any excess taxes. Concurring opinion emphasised the strict construction of tax statutes and the status of external companies, while the Chief Justice penned a dissent arguing that general income-tax laws validly applied to the appellant’s repatriated profits.
<u>TANKO AMADU JSC: </u>
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