Analyst criticises increased tax on fuel products: “Not justified”

Energy Analyst Concerned Over Increased Fuel Tax: “Not Justified”

The Centre for Environmental Management and Sustainable Energy opposes the GH¢1 increase in the Energy Sector Levy. They believe this tax hike is unjustified. The government claims it will help reduce a US$3.1 billion energy sector debt.

Benjamin Nsiah, the centre's director, criticized the levy increase. He stated that an extra GH¢1 tax on every litre of fuel is unwarranted. Previously, the levy was GH¢0.95.

The government argues that this tax is necessary for power supply procurement and to address debt issues. However, Nsiah suggests there are better ways to tackle these challenges.

He pointed out mismanagement and policy inconsistencies as major contributors to inefficiency in the energy sector. He also mentioned that agreements often do not benefit Ghanaians regarding power purchase and gas supply contracts.

Nsiah highlighted that government arrears hinder power distributors like the Electricity Company of Ghana. He recalled similar levies from past administrations had limited effects.

Regarding consumer impact, Finance Minister Cassiel Ato Forson assured that immediate effects at the pumps would be minimal due to a stronger cedi. However, Nsiah anticipates negative consequences from increased fuel costs, leading to reduced disposable income for households.

He warned that this could harm savings and investment cultures among consumers. Nsiah emphasized the need to reduce losses in the power sector, currently above average.

He suggested settling state agency arrears owed to power distributors is crucial. He noted that system losses are around 32%, while other African countries manage below 15%.

Finance Minister Forson justified the levy increase as a way to raise revenue for power sector needs. President John Mahama supported this decision as necessary for stabilizing Ghana’s energy sector.

Minister of Energy John Jinapor defended the timing of the tax increase due to favorable fuel prices now between GH¢11 and GH¢12.5 per litre. He argued it was inappropriate to impose taxes when prices were higher.

Former Vice President Dr Mahamudu Bawumia criticized this tax hike, calling it costly compared to previous levies like the Electronic Transfer Levy.