Profit shifting activities of multinational banks in Ghana

Issifu Ali

Bachelor's thesis

Abstract:

Ali I. Profit Shifting Activities of Multinational Banks in Ghana. Bachelor Thesis. Mendel University in Brno, 2019This study examined the evidence of profit shifting activities of multinational banks, measure the magnitude of profit shifting of foreign banks in Ghana and lastly to find out whether the financing decision by multinationals can be a mechanism of profit shifting. The study covered 10year accounting period from 2006 to 2015 and took into consideration multinational banks operating in Ghana. For this study 13 banks were chosen as a sample size. In all, a total of 130 data set were used. The variables employed for the study was Profit before tax, leverage/debt ratio which represents the dependent variables and the independent variables consists of Differential Tax Rate, Total Assets, Other Income, Personnel Cost, Fixed Assets and macroeconomic variables (Economic Growth, GDP rate, and Corruption Index). From this study, a panel data regression was conducted, and the findings indicated there was evidence of profit shifting where the results of TDIF showed a negative coefficient of 1.823 and was significant on PBT. In addition, the macroeconomic variable namely GDP and GDPR added to the model also showed a negative coefficient of 1.803 and 2.600 respectively. The results obtained using leverage as a dependent variable also proved the coefficient of TDIF was negative (0.106) indicating evidence of profit shifting. In the second mode, CPI was added and the evidence found a negative coefficient of 0.0902. A negative coefficient of 0.1 and 0.0874 was evident after adding GDP and GDPR respectively proving a profit shift.In view of the discoveries, the examination suggests that Ghana as a member of the OECD should stick to the tenets and rules of the OECD action plan which helps to fight profit shifting. Ghana Revenue Authority should tighten the rules in regulating multinationals, especially the transfer pricing rules. Again the Ghana Revenue Authority (GRA)

Abstract:

Ali I. Profit Shifting Activities of Multinational Banks in Ghana. Bachelor Thesis. Mendel University in Brno, 2019This study examined the evidence of profit shifting activities of multinational banks, measure the magnitude of profit shifting of foreign banks in Ghana and lastly to find out whether the financing decision by multinationals can be a mechanism of profit shifting. The study covered 10year accounting period from 2006 to 2015 and took into consideration multinational banks operating in Ghana. For this study 13 banks were chosen as a sample size. In all, a total of 130 data set were used. The variables employed for the study was Profit before tax, leverage/debt ratio which represents the dependent variables and the independent variables consists of Differential Tax Rate, Total Assets, Other Income, Personnel Cost, Fixed Assets and macroeconomic variables (Economic Growth, GDP rate, and Corruption Index). From this study, a panel data regression was conducted, and the findings indicated there was evidence of profit shifting where the results of TDIF showed a negative coefficient of 1.823 and was significant on PBT. In addition, the macroeconomic variable namely GDP and GDPR added to the model also showed a negative coefficient of 1.803 and 2.600 respectively. The results obtained using leverage as a dependent variable also proved the coefficient of TDIF was negative (0.106) indicating evidence of profit shifting. In the second mode, CPI was added and the evidence found a negative coefficient of 0.0902. A negative coefficient of 0.1 and 0.0874 was evident after adding GDP and GDPR respectively proving a profit shift.In view of the discoveries, the examination suggests that Ghana as a member of the OECD should stick to the tenets and rules of the OECD action plan which helps to fight profit shifting. Ghana Revenue Authority should tighten the rules in regulating multinationals, especially the transfer pricing rules. Again the Ghana Revenue Authority (GRA) should improve their Administrative tax system especially in the area of multinational taxing. Tax authorities should be well resourced and educated to equip them with the necessary skills and technical knowledge needed to understand the approach used methods used by these multinationals banks to shift their profit and avoid paying taxes.

Keywords

Tax Differentials, Profit Shifting, Profit Before Tax

Keywords

Profit Shifting, Profit Before Tax, Tax Differentials

Language used: English

Date on which the thesis was submitted / produced: 13. 1. 2019

Thesis defence

• Supervisor: Ing. Ing. Pavel Semerád, Ph.D.

Mendel University in Brno

Faculty of Business and Economics

Bachelor programme / field:
Economics and Management / Business Economics and Management