Electricity tariffs could drop much lower than government is planning to reduce them if the multitude of taxes on petroleum products, which feed into the tariffs, are clipped one way or another, Professor Felix Asante, Director of the Institute of Statistical, Social and Economic Research, has said.
“I was personally shocked when nothing was said on cutting petroleum taxes. Petroleum prices feed into electricity prices due to the thermal component,” he said at a presentation of the institute’s post-budget analysis. “I was expecting some of the cuts in petroleum taxes, but nothing happened.”
For various consumer categories, government is considering between 11 and 21 percent tariff reductions.
Although the institute believes it is a “helpful initiative”, it said government “could have shown more commitment by reducing some of the taxes on electricity”.
Dr. Atta Ankomah, a research fellow at ISSER added: “If you look at electricity to the commercial sector, there is a 17.5 percent VAT on it – and I think government could have shown more commitment by indicating that in the near-future there will be some sort of reduction”.
There are currently 11 different taxes on petroleum products. On average, a litre of petrol sells at GH¢4.48, half of which is actually taxes that go to government.
This means that with the current daily national consumption of a little over 9 million litres of both petrol and diesel, government earns GH¢20million a day.
The tax variables which determine the price of fuel in the country include a 41 pesewas energy debt recovery levy and 40 pesewas per litre road fund levy.
There is also an energy fund levy of 1 pesewas per litre, price stabilisation and recovery levy of 12 pesewas per litre, a primary distribution margin of 7.5 pesewas per litre, and a Bulk Oil Storage and Transportation (BOST) Company margin of 3 pesewas per litre.
Other levies are the fuel marking margin of 2 pesewas per litre, a special petroleum tax of 52 pesewas, a unified petroleum price fund levy of 13.5 pesewas per litre, a marketers’ margin of 20 pesewas, and a dealers’ (retailers/operators) margin of 25 pesewas per litre.
Levies first found their way into the price build-up of petroleum products in 2001, when government introduced a levy to pay off debts owed the Tema Oil Refinery (TOR).
Government then continued with the price stabilisation and recovery levy in 2009 to forestall price fluctuations, and the tax build-up has continued till today.
Ahead of the budget and policy statement’s presentation, the Institute of Energy Security (IES) – an energy think-tank – reiterated its call for a comprehensive review of the taxes and levies on petroleum products.
According to the think-tank, despite assurances that the numerous taxes imposed by the previous administration, which the current ruling party described as nuisance taxes, would be scrapped, the new government only “abolished the excise duties which was just two pesewas”, and reduced the petroleum tax by a negligible percentage in its first budget.