The Minister of Finance, Ken Ofori-Atta is backing the recent announcement by the finance ministers of the G7 countries who are pushing for a global corporate minimum tax of 15 percent. This would require companies from the G7 countries to pay at least a 15 percent rate in each country they operate in.

He believes the move, which represents one of the biggest attempts to reengineer the outdated global tax system, would be crucial to enhance tax compliance of multinational companies.

According to Mr. Ofori-Atta, the move would further help to aggressively fight Illicit Financial Flows (IFFs) from developing nations as well.

Speaking at the second day of the Ghana Diaspora Investment Summit organized by the Ghana Investment Promotion Centre (GIPC), Mr. Ofori Atta said: “Recent discussions on the minimum tax of 15 percent would lead to a change in illicit financial flows which sees billions leave this country not by marauding pirates but by very decent multinationals who we can’t chase because we do not have the technology. The 15 percent minimum would bring quite a bit of resources.”

He added that a recent survey conducted by his office on some players in the nation’s extractive sector revealed that taxes they pay to government is devaluated through legal means.

According to him, one of the surprising outcomes of the survey was that, among the oil companies selected for the survey, the effective tax paid to government (actual amount of tax paid as a percentage of taxable income or profit) was about 4 percent.

He noted that the development cannot be said to be illegitimate because the companies are able to legally find loopholes that they exploit to reduce their tax burden and, in some instances, the state is not well equipped to challenge the figures. “We just did a bit of analysis last week about some of the oil companies and the effective tax was about 4 percent and you begin to understand how these things are legally done,” the minister said.

Multinational companies over the years have been taking advantage of existing tax rules by shuffling money between jurisdictions with super-low rates. The IMF estimates that 40 percent of all foreign direct investment is “phantom” in nature, meaning it is money that passes through empty corporate shells, often for the purposes of lowering a company’s tax bill.

This scheming is not in the best interests of countries that want to collect more taxes from large corporations for development.

In addition to the 15 percent minimum tax, the agreement by the G7 (composed of Canada, France, Germany, the US, Italy, Japan, and the UK) calls for an extra tax on profits from the “largest and most profitable multinational enterprises.”

The provision is meant to address European leaders’ concerns that they cannot sufficiently tax tech giants like Facebook and Google, because while those companies make tons of money in Europe, they are based in the US and pay taxes there. Africa, Asia and other continents have raised similar concerns and have muted strategies to rake in some revenue from the services they render outside the base in the US.