Subah contract valid and cannot be set aside

The technical committee set up by the government to investigate the agreement between the Ghana Revenue Authority (GRA) and Subah Infosolutions Ghana Limited has described the contract as valid and cannot be set aside.

Its decision, according to the committee, was based, among other things, “on the legitimacy and capacity of the board chairman to sign such agreements”. Committee’s Report

The committee noted that the Public Procurement Authority (PPA) and the National Communication Authority (NCA) had confirmed Subah’s capacity to execute the contract prior to the award and signing of the contract document.

It explained that as part of the procurement process, the NCA carried out a technical evaluation and “confirmed that Subah had the technical expertise and equipment for carrying out the task of conducting revenue assurance on payment of Communication Service Tax (CST) by the telecommunication companies”. Instructions

A highly placed source at the Flagstaff House has confirmed to the Daily Graphic that instructions had been issued to the Minister of Finance to implement the report.

Checks at the Ministry of Finance and the GRA also confirmed receipt of the Presidential instructions last month (April) accepting the recommendations of the technical committee

A copy of the report, which is available to the Daily Graphic, confirmed that GH¢74,356,240 had been paid to Subah for services rendered under the contract between 2010 and August 2012 when payments were suspended.

That amount, it said, was against the total declared output tax of GH¢622,831,128.

As to how much was to be paid to Subah on a monthly basis, sources at the GRA and the Ministry of Finance said revenue was not static, as it depended on the output of Subah, particularly the number of calls made and successfully monitored and declared. New fees

The committee proposed that since Subah could not connect to the physical nodes of the telcos at the early part of the implementation of the contract, its fees be reduced from 13.5 per cent to 12.5 per cent because some associated costs were not incurred.

It explained that it was estimated that the cost associated with the connection to the physical nodes was one per cent of Subah’s fees and, therefore, appropriate for the fee to be reduced by that magnitude.

It said per the new agreement, Subah would lose GH¢1.48 million, which would be retained by the government.

“The committee acknowledges Subah’s efforts at monitoring the revenue from the telcos and was vigilant in ensuring that both the government and Subah are fairly treated in the apportionment of the revenue,” it said. Addendum

The Daily Graphic can also confirm that the government’s legal team at the Attorney-General’s Department, the Ministry of Finance, the GRA and their counterparts from Subah Infosolutions are currently preparing an addendum to the existing contract for signing to reflect recommendations of the technical committee. Initial challenges

The technical committee said in the wake of the signing of the service agreement, Subah requested to physically connect its equipment to the physical network nodes of the telecommunication companies “but the request for physical access was denied by the telcos, citing the risk of Subah listening in to the conversation and messages of their customers”, adding, “Subah could not, therefore, have access to the physical network nodes of the telcos.”

It said in the circumstance, Subah had only been carrying out the monitoring relating to verification of the application of the correct CST rate to the volume of traffic declared by the telcos, that is, whether the various calls are taxed at the appropriate rate.

“This is done by Subah obtaining the call data records (CDRs) on the volume of traffic supplied by the telcos to NCA containing the details of the traffic volumes they declare,” it said. Implementation challenges

The committee noted that issues relating to guarantee on data confidentiality had stalled the full execution of the contract and indicated that Subah had to sign a Non-Disclosure Agreement with five operators, namely Tigo, Glo, Expresso, Airtel and Vodafone except MTN.

Notwithstanding the challenges, it said, Subah was currently testing data flow and tax calculation validation at four operator locations after a successful completion of physical installation of monitoring equipment at Glo, Tigo, Expresso and Airtel with Vodafone being the next in line.

It gave a summary of implementation status as MTN, 19 per cent; Vodafone, 69 per cent; Airtel 78 per cent; Tigo, 80 per cent, Glo, 88 per cent, and Expresso 91 per cent. CST Amendment

The committee said one of the reasons Act 864 was passed was to resolve the frustration faced by Subah in the real time monitoring of CST revenue, stressing that “the act makes it mandatory for the telcos to give the government through its agent physical access to the physical network nodes of the service provider’s network at an equivalent point in the network where the network provider’s payment billing systems are connected”. Technical Committee

The Daily Graphic can confirm that prior to the presidential directive in November 2013 for investigations into the GRA/Subah deal, the Minister of Finance had set up a technical committee in May 2013 to review and renegotiate the service agreement between the Revenue Agencies Governing Board (RAGB) and Subah Infosolutions. 

The 14-member committee was also to ascertain whether the agreement could be set aside because it was signed by the chairman of the RAGB.

It had representatives from the Ministry of Finance, the Ghana Revenue Authority, the Attorney General’s Department, the National Communications Authority and Subah Infosolutions. Background of story

Some time in 2010, the GRA contracted Subah Infosolutions to electronically monitor domestic call data records (CDRs) of the telecommunication companies in the country on its behalf for the purpose of collecting appropriate taxes from the companies.

The move was in line with the Communication Services Tax (Amendment) Act, 2013 (Act 864), which imposes an obligation on telecommunication companies to grant the Minister of Finance physical access to their facilities to electronically monitor their CDRs for tax purposes.

The GRA, acting on behalf of the Minister of Finance, had contracted Subah to undertake that task, with an agreement to pay Subah 13.5 per cent of incremental revenue collected thereof.

Incremental revenue is the revenue collected in excess of what the GRA projects to collect within the year.

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