When Ghana’s economy collapsed in 2022 and the country defaulted on most of its international debt, the government went looking for money everywhere. One place it looked was at major companies it believed owed the state taxes. The GRA reopened the tax files of major firms, including MTN, Gold Fields, Kosmos Energy and Tullow.
Tullow, Ghana’s largest oil producer, received several large tax bills. One of them concerned insurance.
Between 2016 and 2019, problems at the Jubilee field, Ghana’s largest oil field, disrupted production. Tullow and its partners had business interruption insurance, which pays companies when they lose income because their operations are disrupted. The insurers paid Tullow for the oil revenue it had lost.
The GRA’s position was straightforward. If Tullow had produced and sold that oil, the resulting profit would have been taxed in Ghana. The insurance payout replaced that lost profit, so it should be taxed in the same way.
The GRA assessed $196.5 million in corporate income tax on the insurance payouts and then added a 100% penalty, bringing the total bill to about $393 million.
Tullow argued that the assessment breached its Petroleum Agreements with Ghana. These contracts set out how Tullow’s Jubilee and TEN operations are taxed and provide protections against changes to the agreed tax regime. In February 2023, Tullow took the dispute to international arbitration at the International Chamber of Commerce in London.
Yesterday, the tribunal ruled for Ghana on every substantive point. It found that the tax assessment did not breach Tullow’s contractual protections and upheld the full $393 million assessment, including the penalty.
Y’agye sika!