Pressure Mounts on Gov’t to Scrap Special Petroleum Tax

Accra, February 7, 2018//-Former Petroleum Minister Emmanuel Armah Kofi Buah, former CEO of Volta River Authority (VRA), Dr Charles Wereko Brobby, and transport unions  have asked the Ghanaian government to scrap the special petroleum tax with immediate effect.

“I think it is important that in the face of the numerous taxes, the special petroleum tax must be removed with immediate effect,” he told TV3’s parliamentary correspondent, Evelyn Tengmaa.

Mr. Buah who is the Member of Parliament for Ellembelle, admitted Ghanaians have not been treated well by government with respect to the increasing fuel prices in the country.

Despite the 2.5% reduction by the Akufo-Addo led government from 17.5% under the erstwhile Mahama administration to 15%, consumers of petroleum products are still calling for further reductions the Special Petroleum Tax.

The Minority in Parliament has thrown its weight behind the protests in the capital against the persistent hikes in the prices of petroleum products. earlier on Wednesday

According to the Minority, the Special Petroleum Tax must be scrapped to ensure a reduction in the price of fuel.

Speaking in an interview with a section of the media on Wednesday, Minority spokesperson on Mines and Energy, Adams Mutawakilu said there is no justification for keeping that tax because “the purpose for its introduction is no more needed.

He said that tax was introduced in 2015 to boost government’s revenue from the oil sector because prices of oil dropped from $60 per barrel to $28 “per barrel which displaced government revenue.”

“As such, President Mahama and his government thought that they should introduce what they called the Special Petroleum Tax of 17.5% with the intention that when petroleum prices rise up to 60 and above, this tax will go off. Looking at the current situation, I think that the government is taking Ghanaians for granted. In our budget, they estimated $57 is what they expect to see in terms of revenue in the oil that we sell. Today it is $63.29 when I checked this morning. Now that is beyond the expected revenue. That means the government is making more revenue than expected in terms of our domestic oil,” Mutawakilu explained.

Mutawakilu, who is also the Member of Parliament for the Damongo Constituency in the Northern Region made the call following pressure from civil society organizations on the government to reduce prices of petroleum products.

NPP gov’t taking Ghanaians for granted

Mutawakilu in the interview further accused government of taking Ghanaians for granted.

“ When circumstances are tough, Ghanaians will understand you but when circumstances are comfortable, please don’t overstretch Ghanaians. They were patient when petroleum prices were low…The Vice president, then running mate, said government was insensitive and that when they come they will take off the special petroleum tax. Today we cannot say prices are low, the prices have risen and therefore there is no reason or excuse leaving this special petroleum tax as revenue. There is no reason for it unless they have changed its objective,” he added.

On Wednesday February 7, 2018 the Chamber of Petroleum Consumers (COPEC) embarked on a demonstration together with the Industrial and Commercial Workers Union (ICU) to register their displeasure with increasing prices on petroleum products.

The group of demonstrators presented a petition to the Energy Ministry and the Ministry of Finance hoping for a reduction.

Reacting to request from COPEC and ICU on Accra-based station Citi FM, Chief Executive Officer of the National Petroleum Authority (NPA), Hassan Tampuli said government cannot scrap or review taxes on petroleum products downward any further.

“If you are saying that we should remove completely the Special Petroleum Tax, price stabilization levy among others, then you are just asking for the collapse of the revenue as far as government projects are concerned.

“What government is doing is in a way responding to the needs and concerns of the Ghanaian people by reducing the price figure by 3%,” the NPA boss noted.

For a former CEO of the VRA, Dr. Charles Wereko Brobby has impressed on government to scrap the special petroleum tax in order to relieve consumers of the burden of escalating petroleum prices.

He maintains that consumers will continue to bear the brunt despite attempts to review the mode of calculating the tax.

Dr. Wereko Brobby’s comments follow the National Petroleum Authority (NPA)’s claims justifying the continuous imposition of the Special Petroleum Tax despite appeals to remove it.

Speaking on the Citi Breakfast Show on Wednesday, Dr. Brobby said,

“What happened in 2016 was very simple, because crude oil prices had gone down, the then Minister of Finance, Seth Terkper introduced the special petroleum tax. At the time, many people complained against it including the current Deputy Minister of Energy in charge of Petroleum.”

The NPP government criticized the former Mahama administration of imposing what it described as nuisance taxes on consumers.

In an attempt to reverse the trend, the NPP administration reduced the Special Petroleum Tax by 2.5 percent.

The tax dropped from 17.5% to 15%.

But this has not gone down well with industry watchers who believe the removal of the tax will bring great relief to consumers.

Dr. Wereko Brobby also explains that removing the tax will be prudent in regulating operations in the sector.

“The NPP itself condemned the policy…the idea of reduction is not tenable; what was put in to cream off reductions that were properly due to the people should be given back and now it is getting even worse because as prices go up, the percentages are going up and it is just giving a worse effect. So none of the suggestions are tenable I should say,” he added.

Fuel hike demonstrators holding a placard in Accra

The Chamber of Petroleum Consumers (COPEC), on Wednesday, February 7, 2018 embarked on a demonstration to demand the removal of the SPT and the petroleum price stabilization levy.

The exercise culminated in the presenting of a petition to the Ministries of Energy and Finance.

Consumers

Pressure is mounting on government to come clear on the implementation of the price stabilization levy on petroleum products.

Industry watchers argue that consumers risk being shortchanged, if the regulators fail to regulate the application of the levy.

The comments come in the wake of marginal rise in the prices of petroleum products for the first two weeks (1st to 15th) of February 2018.

This is the second time in a row that consumers have had to pay a little more for fuel at the pumps.

The first occurred with the second pricing window in January 2018.

Checks by Citi Business News for instance show that major oil marketing companies such as Total, Goil and Shell have increased their prices by some 4 pesewas; to 4 cedis 67 pesewas per litre each of diesel and petrol.

Price stabilization levy overstayed?

The price stabilization levy was first applied in December 2017, as a windfall tax.

At the time, the decision was to cut down on the supposed excessive profits to be made by the Oil Marketing Companies (OMCs) due to the continuous drop in oil prices on the global market.

Demo placard

All things being equal, the government is expected to phase the levy out by the end of this month – February 2018.

But the Principal Research Analyst at the Institute of Energy Security (IES), Richmond Rockson tells Citi Business News the failure to come out with a successive plan, leaves much anxiety among consumers.

“In December, the government said it is putting in place the mechanisms for three months but we were of the view that this is not sustainable as it could only last as a temporary measure. But we need a long term solution which is to review the price build up and that is where all the price components are derived,” he asserted.

The Executive Secretary of the Chamber of Petroleum Consumers, Duncan Amoah couldn’t agree more to this.

In his view, the swiftness in introducing the levy has not been the same regarding concerns by industry and consumers on how the marginal rise in prices of crude oil is affecting the ordinary Ghanaian.

In the meantime, the groups want government to review major tax components that have been slapped on the price build ups of petroleum products to bring relief to consumers.

COPEC embarks on demonstration

In a related development, COPEC is embarking on a demonstration on Wednesday, February 7, 2018 to protest the persistent hikes in the prices of petroleum products.

The demonstration, is in collaboration with the Industrial and Commercial Workers’ Union (ICU).

It will culminate in presenting a petition to the Ministries of Energy and Finance, Parliament and the Office of the President.

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