President John Dramani Mahama is asking Ghanaians to toughen up in the face of recent hikes in petroleum prices, following the introduction of an Energy Levy that has resulted in an average 30 percent increase in prices.
The Energy Levy is the latest tax to be imposed on petroleum products barely 14 months after a Special Petroleum Tax of 17.5 percent was introduced — principally to raise more funds to bridge a widening deficit.
The new levies are captured under the Energy Sector Levies Bill, which was passed recently by Parliament to harmonise energy sector levies.
Speaking at a press conference at the seat of government in Accra, President Mahama argued that notwithstanding the new increment Ghanaians need to brace-up as the raft of taxes remain lower than other lower middle-income countries.
According to him, the decision to introduce the new tax was a difficult one, especially as prices of crude oil plummets to record levels on the world market. While he conceded that the decision was “unpopular”, he stated that his job was “not to introduce popular decisions”.
Analysis by energy policy think-tank African Centre for Energy Policy (ACEP) reveal that the new levies slapped on petroleum products will squeeze out of consumers an incremental revenue of at least GH¢3.2billion annually, based on volumes of petrol, diesel and LPG consumed in 2015, an analysis by the ACEP has shown.
Government is estimated to earn some GH¢5billion from taxes on petroleum products annually, inclusive of all existing levies on petroleum products.
Contrary to the Finance Ministry’s position that the new levies will bring only a 5 percent increase in the price of petrol, 2.9 percent in the price of diesel, and 1.74 percent 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 percent for petrol, 40 percent for diesel and 22 percent for LPG per kg.
President Mahama explained that the decision to introduce the recent increment was further necessitated by the fall in crude oil prices, which will have a negative impact on government oil revenues.
The fall in crude oil prices to about US$32 per barrel could mean that government runs the risk of losing close to US$200million (approximately GH¢800million) in benchmark petroleum revenues after it had used US$53.02 as price per barrel for its benchmark price this year.
This year government estimates it will receive more than US$500million, or approximately GH¢2billion, from petroleum revenues.
Since Finance Minister Seth Terkper presented the 2016 budget to Parliament, the price of crude oil on the world market has consistently declined and the new price of below US$35 per barrel is unprecedented in the last decade.
Oil prices have dropped more than 65 percent since their peak 18 months ago, due to a global supply glut brought about by weak demand and record inventory levels.
President Mahama maintained that introducing the tax on petroleum prices will bring in crucial revenues that will help government pursue key infrastructure projects in the light of the price fall. He asked that consumers of petroleum products be patient with government, as soon such levies will translate into better and improved road infrastructure.
He is hopeful that use of the petroleum levies for infrastructure projects will further translate into more jobs for the country’s youth.