In an ironic turn of events, the National Democratic Congress (NDC), which was previously strongly against the Electronic Transfer Levy (E-Levy), has now implemented a new tax—a GH₵1 per liter fuel levy—that imposes a significantly heavier financial load than the widely criticized E-Levy ever did.
This choice goes against their previous stance as advocates for the average Ghanaian citizen and brings up significant concerns regarding equity, financial fairness, and consistent policymaking.
The article analyzes the actual effects of the new fuel levy, explores its superfluous nature considering the current existence of related taxation measures, and contends that introducing this tax is economically disadvantageous, politically inconsistent, and socially unviable.
The Current Situation: Ghanaians are already paying more than 40% of their fuel costs in taxes and levies.
Many people in Ghana might not be aware that each time they purchase a liter of fuel, their payment covers more than just the petrol; over 40 percent goes directly to the government via an intricate network of taxes, fees, and markups. This system has stealthily driven up the retail price at gas stations, placing additional strain on consumers well before the recent introduction of the extra GH₵1 fuel charge.
As an example, the Energy Debt Recovery Levy charges GH₵0.49 per litre with the aim of assisting in repayment of past obligations related to the Tema Oil Refinery (TOR) as well as other energy-related financial burdens. Additionally, we have the Road Fund Levy at GH₵0.48 per litre, meant for maintaining and developing roadways; however, doubts persist about its efficacy considering the subpar condition of numerous highways throughout Ghana.
The Energy Fund Levy, despite being modest at GH₵0.01 per liter, assists in funding the activities of the Energy Commission. The Price Stabilization and Recovery Levy (PSRL), which stands at GH₵0.16 per liter, was initially designed to protect consumers from fluctuating fuel costs and support subsidies for both premix and residual fuel oils. However, paradoxically, this levy persists continuously even as fuel prices continue to rise dramatically, offering little genuine stability for consumers.
Ghanaians additionally contribute a Sanitation and Pollution Levy of GH₵0.10 per liter with the intention of addressing sanitation concerns. Nonetheless, numerous residents still face escalating waste challenges coupled with inadequate environmental stewardship.
Likewise, the Energy Sector Recovery Levy, set at GH₵0.20 per litre, aims to reorganize and recoup expenses within the energy sector, which still grapples with inefficiency and constant interruptions.
Above these charges lies the Special Petroleum Tax, which adds an additional cost of GH₵0.46 per litre to fuel prices. Introduced as part of VAT reform measures, this tax aims specifically at generating income for the government; however, details about the utilization of this funds lack sufficient transparency.
Next, we have operational and logistics buffers such as the Primary Distribution Margin (GH₵0.11), designed to cover expenses related to transporting fuel from coastal storage facilities to more remote regions. Additionally, there’s the BOST Margin (GH₵0.09) intended for sustaining the infrastructure managed by the Bulk Oil Storage and Transport Company.
Additionally, the Fuel Marking Margin stands at GH₵0.05 per liter, aimed at monitoring fuel products to minimize adulteration and tax avoidance. In parallel, Oil Marketing Companies (OMCs) receive a profit margin of GH₵0.46 per liter known as the Marketers' Margin, with retailers—like service stations—not far behind in securing their portion.
Altogether, these various fees add up to almost half of what you pay at the gas station not being spent on the fuel itself, but rather on an intricate web of taxes and profit margins. Some of these charges overlap unnecessarily or haven’t fulfilled their intended advantages.
In light of this situation, the recently implemented GH₵1 fuel levy by the government isn’t merely another fee; it’s an additional burden on top of an already overly complex taxation system. The state is already collecting substantial funds from every liter sold. Therefore, one must wonder: why introduce a completely new fuel surcharge when current taxes ought to be yielding billions of cedis yearly?
Prior to requesting additional sacrifices from Ghanaians, the government should initially validate the ongoing necessity of each existing levy. Furthermore, they must show evidence that previous taxes were utilized efficiently and with transparency. In absence of such accountability, any fresh taxation measure, regardless of its intended benevolence, would likely be perceived as unfair, unsympathetic, and potentially harmful to economic stability.
GHC 1 Dumsor Levy: An unwarranted and superfluous inclusion
The rationale provided for introducing this new tax is to finance development projects and energy transition efforts, with particular emphasis on tackling Dumsor. Nevertheless, these very goals are already covered under existing taxes.
1. The Energy Sector Recovery Levy (GH₵0.20) and the Energy Debt Recovery Levy (GH₵0.49) were implemented to tackle financial shortfalls within the energy sector.
2. The Sanitation Levy (GH₵0.10) tackles environmental issues, which are similarly invoked as justification for the new fuel tax.
3. PSRL (GH₵0.16) is designed explicitly to stabilize prices; however, consumers seldom reap the benefits of these efforts, which raises concerns about accountability.
The GH₵1 per liter fuel levy does not introduce anything novel. Instead, it merely replicates existing charges without providing an enhanced accountability mechanism or tangible benefits for residents.
Economic Effect: Comparative Analysis of Costs Between GHS 1 Dumsor Levy and E-Levy
Let's contrast the newly introduced GH₵1 Dumsor levy with the former 1% E-levy.
The E-Levy, implemented by the NPP administration, imposed a 1% fee on digital monetary exchanges like mobile money transactions and bank transfers.
The effect of this mainly extended to digital users—those who utilized electronic platforms for transferring or receiving funds. People favoring cash transactions could entirely sidestep the levy.
On the contrary, the new fuel levy enforces a consistent GHC 1 tax on each liter of fuel bought. This universal tax impacts all Ghanaians, either directly or indirectly. Regardless of whether you have a vehicle or where you reside—in an urban center or a remote village—this levy influences everyone since transportation is crucial to the nation’s economic framework.
The disparity in monthly costs is quite significant. For an average commercial driver who consumes around 30 liters of fuel daily, they can expect their expenses to increase by roughly GH₵900 every month due to the additional levy. By contrast, if this driver received GH₵2,000 through digital transactions within a month, the resulting E-Levy fee would be merely GH₵20—a negligible portion compared to the former amount.
Furthermore, the economic impact of the fuel levy extends much further and is more detrimental. The E-Levy caused only slight inflationary effects since it focused on digital transactions instead of the actual movement of goods and services.
Nevertheless, the Dumsor levy escalates the expense of transportation, consequently raising the prices of almost all products and services within the nation. This leads to increased inflation and diminishes the buying capacity of typical Ghanaians, particularly affecting the impoverished populace and the working class.
Fundamentally, whereas the E-Levy was specific and optional, the Dumsor levy is widespread, mandatory, and has a negative impact on economic progress.
For individuals who do not utilize digital services, the Dumsor levy will still impact their transportation costs, food prices, electricity from generators, and overall cost of living. A trotro driver consuming 30 liters per day now faces an additional expense of GH₵30 each day, amounting to GH₵900 every month—a financial strain that is 45 times higher than the typical monthly cost of the E-Levy.
Pressures from inflation affecting the impoverished populace
Petrol costs affect numerous industries including food distribution, transportation, manufacturing, farming, and logistics. An increase of ₵1 per liter leads to elevated transport fees, increased food prices, and higher costs for all products that require shipping. Consequently, inflation disproportionately impacts those with lower incomes.
Mismanagement and Ineffectiveness of Current Taxes
Prior to implementing any additional fuel taxes, the government should initially ensure proper management of current levies. For instance:
1. The Price Stabilization and Recovery Levy is seldom employed for stabilizing prices.
2. The Energy Sector Recovery Levy and Energy Debt Recovery Levy remain in place without any public auditing or expiration date, despite the promise of sector restructuring.
3. The Road Fund Levy is collected diligently, but roads continue to be in poor condition, particularly in rural and peri-urban regions.
The absence of openness and effective use of present fuel taxes erodes the ethical credibility to introduce additional charges.
*Conclusion: Eliminate the Dumsor Levy and Streamline Current Levies as Outlined in Section 152 (Page 43) of the 2025 Budget Address*
The implementation of a GH₵1 per liter fuel levy is economically unfounded, politically disingenuous, and socially backward. Ghanaian citizens are already overwhelmed by numerous existing fuel taxes and charges. Instead of further taxing, what is required is:
1. Streamlining current charges by combining duplicate fees and eliminating unnecessary ones.
2. Accountability measures for the public regarding taxes associated with each type of fuel.
3. Policies aimed at economic assistance, rather than punitive financial measures during times of difficulty.
The NDC has to decide whether to govern with empathy or opt for expediency.
If President Mahama’s administration genuinely supports the citizens, particularly the impoverished who are struggling, they should immediately abolish or pause this Dumsor levy. This move would help rebuild confidence and initiate an open discussion on fuel prices, tackle the issue of Dumsor, and address tax policies in Ghana.
Signed….
Razak Kojo Opoku (PhD)
Founder President of the UP Tradition Institute
Provided by SyndiGate Media Inc. Syndigate.info ).
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