Fuel Prices Strained by Taxes

The 11 different taxes on petroleum products in the country have sparked calls on the government and other stakeholders to eliminate some of them, described by a section of the motoring public as falling in the category of nuisance taxes.

A thorough assessment by the Daily Graphic revealed that for every litre of petrol now sold at GH¢4.39, there was a tax component of GH¢2.17, constituting about 49 per cent of the ex-pump price.

This means that with the current daily national consumption of about 10.2 million litres of both petrol and diesel, the government bags GH¢27.132 million a day.

The phenomenon has forced the Chamber of Petroleum Consumers (COPEC) to call on the government and other stakeholders to rethink some of the taxes in order to review petroleum prices downwards.

In an interview, the Executive Secretary of COPEC, Mr Duncan Amoah, said the chamber took a very serious view of the recent increases in fuel prices and called for a review of some of the taxes to give consumers some respite.

“It will be difficult to accept that the government cannot reduce taxes on petroleum products, especially at a time when world market figures are rising and a lot more revenue will be made from our petroleum exports from the Jubilee and the TEN fields.

“It is, indeed, worrying that so many taxes continue to exist in the price of petroleum products,” he said.

The past four petroleum pricing windows have seen an average cumulative increase of about 9.84 per cent for a litre of petrol that used to sell at GH¢3.68 but is now selling at GH¢c4.39 per litre, while a litre of diesel is selling at GH¢0.1 less.

While the prices of petroleum products are largely influenced by the world market price of crude oil, the tax element at the pump constitutes more than half of the ex-refinery price.

Litany of taxes

The tax variables that determine the price of fuel in the country include a 41Gp energy debt recovery levy and 40Gp per litre road fund levy.

There is also an energy fund levy of 1Gp per litre, price stabilisation and recovery levy of 12Gp per litre, a primary distribution margin of 7.5Gp per litre and a Bulk Oil Storage and Transportation (BOST) Company margin of 3Gp per litre.

Other levies are the fuel marking margin of 2Gp per litre, a special petroleum tax of 52Gp, a unified petroleum price fund of 13.5Gp per litre, a marketers’ margin of 20Gp and a dealers’ (retailers/operators) margin of 25Gp per litre.

Levies first found their way into the price build-up of petroleum products in 2001 when the NPP government introduced a levy to pay off debts owed the Tema Oil Refinery (TOR).

The NDC government also continued with the price stabilisation and recovery levy in 2009 to forestall price fluctuations and the tax build-up has continued till today.

The government responds

But the Minister of Energy, Mr Boakye Agyarko, has said in an interview that the government has little control over the rising prices of fuel.

“The international market component is usually a demand-and-supply function, which is often affected by other geopolitical developments across oil producing countries,” he said.

When asked to respond to the multiplicity of taxes on fuel prices, which the government had control over, he said it would not be proper to isolate one variable in the fuel price build-up without a comprehensive analysis of the price.

COPEC disagrees

But COPEC disagreed and said it was worried over the many taxes which continued to exist on petroleum products whose actual use or basis for collection was non-existent.

“For instance, the price stabilisation and recovery levy which is currently charged at 12Gp per litre on petrol and 10Gp per litre on diesel was put as a containing measure to stabilise prices in the unlikely event of shocks and fluctuations on the international market and could be varied downwards to stabilise prices,” said Mr Amoah.

That levy, he said, had since 2001 never been used nor adjusted to help prices stabilise when fuel prices had been disturbing, as prevailing now, and had continued to remain the same at 12Gp per litre.

Again, he said, the primary distribution margin of 7.5Gp charged per litre, which was meant to ease the burden on importers of petroleum products to be able to sell at even prices across the country, irrespective of the region, was currently not used for that purpose and oil marketing companies (OMCs) were having to pay different quotations for products in different depots.

The analysis

“Calls for the fixing of a specific amount in respect of the special petroleum tax (SPT) have not been heeded to till date.

“The SPT continues to be a huge burden on both OMCs and consumers, as the 15 per cent variable increases anytime there is an increase in any of the variables, such as the world market price or the forex differential.

“Unfortunately, the consumer is paying for such taxes which are hardly of any benefit to the people,” he said.

Source: Graphic