Pressure is mounting on the Ministry of Finance to immediately review taxes on petroleum products to check the galloping fuel prices that the country is experiencing.
A litre of petrol is now going for GH8.400 at some filling stations across the country.
Although, a barrel of crude oil now goes for $113, Ghana’s situation is believed to have been compounded by the numerous taxes on petroleum products.
The Russian attack on Ukraine on one hand, and the Yemeni Houthis and Saudi and the United Arab Emirates on the other hand, are the main reasons for the steep rise in prices of petroleum products.
All the levies Sector Levies Act (ESLA) 2015 (Act 899), as amended. The Energy Debt Recovery Levy (EDRL in the price build-up (PBU) of petroleum products have been assigned to specific uses as indicated in the Energy) for instance has been committed to the E.S.L.A Plc which was established as a Special Purpose Vehicle (SPV) primarily to issue debt securities to refinance the Energy Sector Debt.
The pressure on the finance ministry to review the taxes on petroleum products is because some tax is not tied to any specific use unlike the levies and therefore contributes to the revenue generated into government’s consolidated fund to support the national budget. In the wake of the consistent rise of prices of petroleum products, it was crucial for government to reduce some of the taxes and levies imposed on petroleum products.
It is recall that government recently temporarily suspend the Price Stabilisation and Recovery Levy (PSRL) for a period of three months ( November 2021 to January 2022) to cushion consumers.
This was in line with the purpose of the PSRL as stated in the ESLA. However, the PSRLs had to be reinstated effective 1st February 2022 because it is the same levy that is used to raise revenue to pay for the existing subsidies on Premix Fuel and Residual Fuel Oil (RFO). Inability to pay for the subsidies on these products is threats to their continuous supply.
Insiders say that government through the Ministry of Finance should review some of the other levies such as the Energy Sector Recovery Levy and the Sanitation and Pollution Levy downwards as an interim measure to cushion consumers from paying high cost of fuel at the pumps. Such an intervention could be stopped when the prices on the international market starts to fall.
According to the insiders, because of the huge fiscal challenge faced by government and how difficult it may be for government to review the taxes and levies, it was equally important to consider the plight of the final consumers of petroleum products.
Ghana has deregulated regime where government is not in charge of determination and announcement of the prices of petroleum products but its charges levies and taxes on the products and that was contributing to the galloping of fuel prices at the pumps.
Presently, the tax elements of the ex-pump price of both gasoline and gasoil constitutes about 26%.
What it means is that should the Ministry of Finance agree to review taxes and levies on petroleum products, consumers would have some breathing space as part of the 26% taxes and levies would be off.
In less than a week, transport fares went up by 15% and are likely to go up again if the prices of Petroleum products are not stabilized immediately in Ghana through the revision of taxes and levies.
The world prices of crude oil are not expected to come down anytime soon but rather go up, an indication that prices of petroleum products would continue to rise.