Government can raise more revenue while discouraging patronage of over-aged vehicles if it includes the proposed Sanitation and Pollution Levy (SPL) on roadworthy certificate fees rather than on fuel, a transport industry researcher and a member of the American Economic Association, Harrison Okyere Nyarko, has said.
Government announced in the 2021 budget that it will introduce a Sanitation and Pollution Levy of 10 pesewas to be incorporated into the proposed fuel levy; however, Harrison Nyarko believes that it can kill two birds with one stone if the tax is incorporated into the price build-up for roadworthy fees – such that the age of vehicles, from the date of manufacture, determines the amount to be paid.
“While raising revenue for government, the tax should also be used to discourage consumption of certain goods such as over-aged vehicles, which arguably pollute more than their newer counterparts,” he advocated.
To him, the proposed tax is a good opportunity for government to further regulate the use of over-aged vehicles and dumping; especially since the country does not have a comprehensive system of policies to regulate vehicle disposal.
“There is a tax regime that discourages importation of over-aged vehicles, but not their usage. Importers of those vehicles pay higher taxes at entry, but no responsibility is placed on the user. So, if an importer can afford a one-time tax payment, the vehicle will be imported. However, if users of those vehicles suffer some taxes in the form of higher roadworthy renewal fees they will minimise their patronage, which will also go to reduce their importation,” he said.
In an October 2020, the United Nations in its Environment Programme report titled ‘Used Vehicles and the Environment’ cited pollutant and climate emissions, quality and safety, energy consumption and cost of operation as key concerns in the global trade of used vehicles – especially in Africa, where over 40 percent of the trade takes place.
Among other things, the report said vehicle emissions are a major source of fine particulate matter and nitrogen oxide, which are major contributors to air pollution. It said these substances are responsible for strokes, chronic respiratory diseases, lung cancer, diabetes and other non-communicable diseases, calling for stricter regulation to ensure the quality of vehicles and reduce (urban) air pollution and global climate emissions.
“A sanitation and pollution tax is a form of ecological tax, which is usually levied on principles a polluter pays. That is, if you are the cause of pollution, then you should pay for the measures aimed at controlling it. So, I think this form of tax is long overdue and I commend government for the initiative. I urge Ghanaians to welcome it and rather direct criticism to the way it is levied,” he said.
How should the SPL be implemented?
On how government should implement the SPL tax, Mr. Nyarko suggested three different approaches for different categories of polluters; with the first being to levy vehicle users rather than including the ten pesewas on the per litre price of fuel.
“Given that a roadworthy fee is charged periodically, government will be required to determine specific amounts to include in the price build-up per different age groupings of vehicles. For example, we could say if your vehicle’s age is between 1 to 5 years, we would include GH¢50 as pollution tax in your roadworthiness fees; if your vehicle is aged between 5 to 7 years, pay GH¢80; between 7 and 10 years, pay GH¢100: 10 and 15 years pay GH¢200; over 15 years, pay an X amount, and so on,” he indicated.
Doing so will mean purchasing fuel at the pump does not attract pollution tax, since those taxes would already have been paid when owners of vehicles renewed their roadworthy certificates.
The second mode of implementation he proposed relates to bulk consumers of fuel. For this category, he said the levy should be left within the price build-up per litre of fuel as has been proposed by government.
“Since this category of consumers are invoiced directly by Oil Marketing Companies (OMCs), pollution tax should be easy to collect by making them the collection agents. The OMCs only need to declare quantities sold to the National Petroleum Authority (NPA) and pay taxes on those quantities. This should not be difficult, as the same declaration process is used in the case of the Unified Petroleum Price Fund (UPPF),” he said
The final recommendation is sachet drinking water and light plastic manufacturers, where he is calling for the levy be paid per tonnage of products produced by annum; while for waste management companies Mr. Nyarko suggested that because the ultimate taxpayers will be households, care should be taken not to discourage people from using their services or create the impression that one has a right to litter the environment simply because he or she has paid a sanitation levy.