Ghana May Be Taxing Petroleum beyond IMF Guidelines

While those in the developed world often complain about the price of petroleum, the markups experienced in nations like the United States and Germany may pale in comparison to the fees charged by a particular developing nation in Africa. 

While those in the developed world often complain about the price of petroleum, the markups experienced in nations like the United States and Germany may pale in comparison to the fees charged by a particular developing nation in Africa. 

According to recent accusations leveled by the Africa Centre for Energy Policy (ACEP), an Africa-based energy think tank, Ghana has breached International Monetary Fund (IMF) approved boundaries pertaining to the pricing of petroleum products. The brackets in question, established for developing countries, limit nations’ ability to impose fees, like taxes and tariffs, beyond a range of 22 to 30 percent.

These limits encourage investment and protect the local population from governments that might otherwise take drastic measures to avoid economic hardship. However, according to the ACEP, Ghana’s current taxing structure exceeds a 41 percent markup. 

In response, the Ghana Web reports, the Ghanaian government said that the January 1 adjustment in the prices of petroleum products were between 18 and 28 percent. However, the ACEP says the government has vastly misrepresented these numbers, increasing prices by 41 percent or more. Before the most recent round of adjustments, the ACEP asserts, petrol prices already had a 28 percent markup. Similarly, diesel was 18.7 percent before the most recent levies, and is now 41.7 percent.

Dr. Mohammed Amin Adam, Executive Director of the ACEP said, “We are now way, way, way outside the developing circles … Ghanaians are being asked to pay much more … we least expected that Ghana will go outside the developing bracket.” 

Unfortunately, the Africa Centre for Energy Policy says the problem does not end with excessive rates; it has also accused the government of engaging in double taxation. According to ACEP, the Ghanaian Special Petroleum Tax places a fee on products that already have taxes embedded in their prices. Thus, after one round of taxation, the government again taxes the products, adding an additional 17.5 percent to the established price. 

Dr. Adam’s comments came during a press conference on Thursday, during which he accused the government of raising 674 million Ghana cedis illegally via these taxing practices. If his calculations prove correct, Ghana would have one of the world’s highest petroleum taxes—far higher than allowed by the IMF for developing member nations. 

ACEP fears that Ghana’s tax structure may discourage foreign investment. “There are positive aspects of this Act [containing the taxes]; we also think there are negative aspects which [the] government has the opportunity to look at again.”