Gov’t to rake in GH¢3.2bn from new levies

The new levies slapped on petroleum products will squeeze out of consumers an incremental revenue of GH¢3.2billion annually, based on volumes of petrol, diesel and LPG consumed in 2015, an analysis by the African Centre for Energy Policy (ACEP) has shown.

When existing levies and taxes are added, government is estimated to earn some GH¢5billion from taxes on petroleum products annually.

Consumption of the three commodities in 2015 amounted to 1.5billion litres of petrol, 1.9billion litres of diesel, and 272.8million kilogrammes of LPG. 

Contrary to the Finance Ministry’s position that the new levies will bring only a 5% increase in the price of petrol, 2.9% in the price of diesel, and 1.74% increase in the price of LPG, ACEP said its analysis shows a much “greater and punitive” effect.

By taking account of the Special Petroleum Tax, which is charged on the ex-pump, ACEP arrived at a price increase per litre of 33% for petrol, 40% for diesel and 22% for LPG per kg.

The new levies are captured under the Energy Sector Levies Bill, which was passed recently by parliament to harmonise energy sector levies. 

Under the new regime, the TOR Debt Recovery Levy has been subsumed under a broader Energy Debt Recovery Levy, part of which will go into settling debts owed to Bulk Oil Distributors.

Other levies include Price Stabilisation and Recovery Margin, the Public Lighting and National Electrification Scheme Levy, and an increase to the existing Road Fund from GHp7.3 to GHp40 per litre. 

Some of the levies have however been criticised heavily by members of the public, especially those that relate to the settlement of debts and infrastructure investment in the power sector.

As part of their electricity bill consumers pay capacity charges meant for investment by the utilities, as well as an energy charge for the purchase of fuel for generating plants. 

“We have challenges understanding why apart from paying higher electricity tariffs, consumers are also being asked to pay debts accumulated from inefficiencies on the part of VRA and ECG; as well as government’s negligence of its responsibility to the utilities, through petroleum levies,” ACEP said at a press conference in Accra.

“There are alternative ways of supporting generation infrastructure development,” indicated Dr. Mohammed Amin Adam, Executive Director for ACEP, calling for private participation in the thermal component of “a restructured VRA Holding Company, to ensure its competitiveness against IPPs”.

Government, he added, should adopt open and competitive bidding for power projects which will attract IPPs that have the money to invest and not speculators who inundate government with requests for guarantees of all kinds.

“Government should also revisit its proposal to issue energy bonds for generation infrastructure and paid for through electricity tariffs.”

According to the IMF, the average tax share in ex-pump prices of petrol and diesel in developing countries ranges between 22% and 30%.

ACEP estimates, however, that with the current levies in Ghana, the tax component in proportion to the ex-pump prices of petrol and diesel are 41% and 42% respectively.

“Therefore, the share of taxes in petroleum prices in Ghana is one of the highest in the developing world,” Dr. Amin Adam noted.