Press Statement on the current Energy Sector Levies Act 2015 (Act 899)

1.0 INTRODUCTION

The Government through a certificate of urgency passed the new Energy Sector Levies Act (Act 899) in December 2015, which has now taken effect since 4th January 2016. The Act provides for the harmonization of major energy sector levies and taxes. Government officials have explained that the levies are intended to mobilize revenues to service government debts especially in the road sector and power sector. It is common, as we know that most governments around the world raise revenue through petroleum taxes and levies because it is easier to collect; and also the demand for the products is inelastic. In some cases, such levies are intended to encourage energy conservation and climate justice. We estimate that based on volumes of petroleum consumption (Petrol, Diesel and LPG) in 2015, the new levies will generate an incremental revenue of GHS3.2 billion annually. This is the burden the new levies impose on petroleum consumers. Taxes are important for the development of every nation. To that extent, ACEP appreciates the need for citizens to contribute reasonably to support government programmes. Therefore we do not oppose taxes; but we are of the view that imposition of taxes should be in sync with good governance practices of transparency and accountability rooted in broad consultation with citizens. The Energy Sector Levies lasted only three days in parliament without providing for public consultations in spite of the enormous burden the Act seeks to put on citizens. Such actions are likely to affect public trust in their governments, which could undermine government’s ability to implement good policies in future. It is also important to note that, over-reliance on petroleum taxes and levies could adversely affect the economy in many ways – inflation, growth deceleration, social development challenges, etc. 

Commendation

Over the past two years, ACEP has actively campaigned for the abolishing of some levies and margins on petroleum products – TOR Debt Recovery Levy, the Exploration Levy and BOST margin. We are happy that Government has abolished the exploration levy. We have also called for the operationalization of the price stabilization fund to stabilize ex-pump prices and to serve as a buffer against price under-recoveries. This has also been operationalized through the new Energy Sector Levies Act. These are laudable decisions and we wish to commend government for accepting our proposals. It is also worthy of mention that the harmonization of major energy sector levies into one piece of legislation will provide for consistency and predictability in energy levies.

The Africa Centre for Energy Policy (ACEP) was established in 2010 to contribute to development of alternative and innovative policy interventions through high-quality research, analysis and advocacy in the energy and extractives sector in Africa.

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