On Tuesday, Ghanaians woke up to the shocking news of a GHC1 per litre levy imposed on all petroleum products. This bill, which was carried and passed under a certificate of urgency, is intended to cushion the government’s efforts to defray the ballooning energy sector debts and, to a greater extent, end the vicious cycle of Dumsor. Since its announcement, however, the move has drawn massive criticism across the breadth of public opinion, with many warning of the dire consequences of additional costs on petroleum prices. This short note sheds light on public opinions and mine regarding this development:
Ministers of Finance and Energy Eroding Public Trust
At his vetting, the Finance Minister was very clear about increasing Ghana’s tax-to-GDP ratio from 13.5% to 16.5% without increasing or introducing new taxes. While responding to his government’s promise to scrap the E-levy, COVID-19 levy, and betting taxes, Ato Forson dismissed the view that these scrapped taxes would be replaced by equally punitive ones. The imposition of this GHC1 levy on every litre of petroleum product invariably defeats Ato’s stance. This intriguing turn of events exposes some level of inconsistency, lack of principle, and dishonesty in our body politics—a development that further erodes the fast-declining confidence in politicians and, by extension, Ghana’s fledgling democracy. Moreover, the Energy Minister’s public statements regarding the end of Dumsor have come under intense scrutiny, as some have questioned why a Dumsor levy will be imposed when the Minister has publicly announced an end to the phenomenon. Listening to the Minister of Energy on Citi FM’s morning show, one gets the sense that the levy will not even be enough to defray the $3.1 billion energy sector debt while providing the much-needed funding to support the purchase of liquid fuels to power our thermal plants. To date, we the good people of Ghana are yet to come to terms with why the rather astronomical cost of power by the IPPs has not been renegotiated. It is said that Ghana pays 18 cents per kilowatt-hour for power—the highest in the sub-region. These two Ministers, whose portfolios are very critical, must ensure they do not erode goodwill and public confidence with their conduct and utterances. Ato, this move is bad.
Stakeholder Engagements
For a government that had vehemently opposed the E-levy, citing lack of consultation and stakeholder engagement, the least we expected was that the new administration would impose a tax under a certificate of urgency, throwing to the wind the need for extensive stakeholder consultations. From all indications, the government sought to avoid the pushback that the imposition of this tax could bring, hence the decision to muscle up its numbers in parliament for the purpose. It is therefore not surprising that stakeholders, including civil society groups, journalists, and energy analysts, have been unanimous in their condemnation of the new levy.
Pushback from Across the Board
Civil society groups and energy analysts have not been enthused by this ambush tax. The Association of Oil Marketing Companies, led by its President, has not minced words in condemning the move. Franklyn Cudjoe of Imani Africa has roundly criticized it, calling it the fastest pocket-picking tax. Dr. Steve Mathew, a prominent expert who led IPAC for years, has also warned of the damaging impact this tax could have on food and transport prices. Duncan Amoah, a known energy analyst, has berated the government for burdening the Ghanaian public with so many levies while inefficiencies and mismanagement within the energy sector continue unabated. In a rather animated statement, the President of the Concerned Drivers Union strongly decried the move, promising to fight it with every ounce of energy the union can muster. For the drivers, the government’s decision to almost compel them to reduce fares, only to impose an additional GHC1 on every litre of fuel, smacks of bad faith—something their members will strongly resist if it is maintained. For his part, Ben Boakye of ACEP stated:
“Just avoid being Ofori-Atta 2.0. ESLA is 10 years old—a terrible way to celebrate this anniversary. The pockets of people don’t fix inefficiencies; decisive action does. The beneficiaries of these inefficiencies walk down our streets as millionaires—they invent nothing.” Even known NDC sympathizers are vexed by this news. The likes of Cadman Atta Mills, Oliver, and others have not responded positively to this development. Across the board, many have been taken aback, and criticism has been both wide and dire.
Downstream Sector
Already, the downstream petroleum sector is bedevilled by the twin impacts of taxes and debts. Interestingly, most of these taxes and levies were imposed with the view to addressing the very challenges this new levy seeks to address. Given our failed capacities to leverage some of these levies and taxes from petroleum in the past, how are we to accept that this case would be any different? Questions have been raised about how the Energy Sector Recovery debt and Energy Development Levies have been used. Some have questioned the accountability and transparency in the use of over GHC 9.7 billion collected annually by way of taxes, levies, and margins. Without a doubt, the downstream sector risks breaking down if the government’s appetite and penchant for resorting to it for revenues is not curbed. Already, the Ministers of Interior and Local Government have asked for similar levies to be imposed for the retooling of the Ghana Fire Service and for sanitation purposes, respectively.
Impact
This new tax, as many analysts have predicted, will impose an unbearable burden on the consumer. As the innocent Ghanaian continues to battle high inflation, salary stagnation, and a generally high cost of living, the least expected from a government that promised a reset is for such obnoxious taxes to be clandestinely imposed. Without a doubt, this imposition will increase the cost of transportation, which will, in turn, drive up the cost of food and other essential commodities.
Conclusion
From all that the public and experts have said, it would be injurious for the government to proceed with implementation. Maybe extensive stakeholder engagement is required to reach consensus on the best amount to charge for the purpose.
By: Samuel Osarfo Boateng
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