Kick out “wicked” fuel taxes – COPEC charges parliament

The Chamber of Petroleum Consumers-Ghana, (COPEC-Ghana), has called on  Parliament to reject what it termed an insensitive move by government to burden consumers with high fuel taxes.

It said the proposed fuel taxes announced by government in the 2021 budget would escalate the cost of living for everyone.

The Executive Secretary of COPEC-Ghana, Duncan Amoah, who has championed the removal of existing levies, took issue with government for introducing new taxes instead of removing counter-productive levies.

“The very low point clearly has to do with the insensitivity with which our finance ministers always decide to go for the low hanging fruits – fuel taxes,” he lamented in an interview with theghanareport.com.

“Parliamentarians must for once, show that they have what it takes to reject this wicked proposition to further increase fuel taxes by 5.7 per cent or 30 pesewas against the average Ghanaian,” he advised.

He said the government should not pile taxes on a few people who are already overburdened.

Ghana has one of the highest prices of petroleum products within the sub-region.

“Unfortunately, we have seen six fuel increments over the past two months,” he said to buttress his argument. “Fuel prices that were trading for GHC4.20 in January are currently at GHC 5.45, a clear difference of 78-80pesewas”

He challenged government to seek alternative sources of raising revenue and not put Ghanaians through more suffering.

One of the ways he proposed was the broadening of the tax net to increase the number of taxpayers.

What levies have been introduced?

Presenting the 2021 Budget Statement and Economic Policy on Friday, March 12, caretaker-Finance Minister Osei Kyei-Mensa-Bonsu explained, “government is proposing a Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act (ESLA).

He added: “Mr Speaker, it has become very necessary for the government to consider a review of the energy sector levies. The Energy Sector Recovery Levy of 20 pesewas per litre on petrol/diesel under the ESLA is hereby submitted to this House for approval.”

According to him, under the Energy Sector Recovery Levy (Delta Fund), the government abolished excise taxes and reduced the special petroleum tax from 17.5% to 13% to mitigate the impact on domestic petroleum prices when crude oil prices increased substantially between 2017 and 2018.

“However, due to the difficulties faced by our economy arising from higher excess capacity payments in the energy sector, which have not reflected in electricity tariffs,” the government has been compelled to revisit the levies.

He pointed out the need to find additional resources to cover “excess capacity charges that have resulted from the Power Purchase Agreements (PPAs) signed by the previous government which required payments for capacity charges even when the plants involved were idle or unutilised”.

The Ministry of Finance said it paid over GH₵12 billion as the cost of excess energy capacity charges inherited since 2017.

In addition, the government plans to review existing road tolls and align them with current market rates

“This will form part of the framework for promoting burden-sharing as we seek to transform our road and infrastructure sector in a post-COVID era,” Mr Kyei-Mensa-Bonsu said.

Road tolls

But COPEC-Ghana believed tolls paid in the past have not been utilised efficiently in maintaining roads.

“The same people who purchase fuel and are complaining are the same people you are taking road tolls from. The unfortunate thing is that we are not even seeing an improvement in our road infrastructure to say that what we have been paying in the last 20 years have gone into developing roads”.

He cited the poor nature of the Accra-Motorway stretch where tolls have been collected for years yet portions of the highway remain in a bad state.

“This is not good enough and politicians must take Ghanaians seriously done they currently do,” he stressed.

He said the government must prove to Ghanaians what has been done with taxes collected in the past to justify the introduction of new or increment in old taxes.

According to him, “Any attempt by parliament to approve these new taxes would also be met with the same level of resistance as this proposition itself in getting across”

Revenue

The government is forecasting US $ 800million in Petroleum Revenue for 2021.

Ghana’s revenue is hinged on crude oil projected at a benchmark price US$54.75 per barrel, up from US$39.1 per barrel for 2020.

But Mr Amoah believes Ghanaians are being short-changed.

In the upstream mix, “You already have crude prices above your projected revenue expectation; currently, you are at $67-$69, so you are getting additional revenues that are unbudgeted for”.

He, therefore, questioned why downstream consumers should pay more taxes while the government is already raking more revenue from international markets.

Cap fuel taxes

Henceforth, Mr Amoah wants parliament to place a ceiling on fuel taxes because no legislation specifies what is permissible.

Consequently, “any Finance Minister can slap any amount of fuel taxes and if parliament goes ahead to accept without scrutiny Ghanaians will be doomed”.

The legislation would cap fuel taxes and finance ministers would be compelled to look for revenue from other sources once the threshold is triggered.

“Consumers should not be taxed beyond 25 per cent of the cost of fuel products,” he concluded.

Block revenue leakage

Mr Amoah drew the attention of authorities to revenue leakages that need redress.

“There is already a lot of revenue which is due to the state but ends up in private pockets,” he pointed out.

This is captured in a Chamber of Bulk Oil Distributors (CBOD) report which suggested that the lost GHC1.9billion to tax evasion in 2019.

The Chamber blames the losses on a compromised Petroleum Product Marking Scheme (PPMS).

Mr Amoah believes the culprits are “high and mighty people in society”. These people “are able to get past the system and put fuel on the market without paying any taxes”.

He accused the state of failing to clamp down on “the illegal trade but watch revenues that are accumulated to the state go into private pockets”.

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