Minority rejects fuel oil levy increase, warns of higher production costs

The Minority in Parliament has strongly opposed the government's decision to increase the fuel oil levy from GH¢0.24 per litre to GH¢1.93 per litre, warning that the measure could drive up production costs, increase consumer prices, and undermine efforts to keep inflation under control.

The levy increase, introduced through amendments to Ghana's Energy Sector Levies framework, is intended to reduce revenue losses caused by fuel smuggling and subsidy abuse. However, opposition lawmakers argue that raising taxes is not the appropriate solution and have urged the government to strengthen enforcement mechanisms instead.

Speaking during parliamentary debate on the Energy Committee's report, the Member of Parliament for Tano North, Dr. Gideon Boako, argued that there is no evidence to suggest that imposing a significantly higher levy would eliminate fuel smuggling.

According to him, individuals involved in illegal fuel trade continually adapt to new government measures, making tax increases an ineffective deterrent.

"Once the hunter has learnt to shoot without missing, the bird also goes flying without perching. So there is no justification or indication that if we introduce additional tax, the smuggling will stop," Dr. Boako stated.

He maintained that government should instead invest in stronger surveillance systems, electronic monitoring technologies, and improved compliance measures capable of identifying and preventing illegal fuel movements.

The Minority further warned that although fuel importers and manufacturing companies would be legally responsible for paying the higher levy, the additional expense would inevitably be transferred to consumers through increased prices.

Dr. Boako explained that many industries depend heavily on fuel oil to power factories, generators and industrial equipment, meaning any increase in operational costs would affect the prices of goods and services.

"If a manufacturing company relies on fuel oil for boilers, generators or industrial heat, any additional cost by way of this tax will be passed on to the consumer," he noted.

According to the Minority, the levy could place further financial pressure on households already grappling with the cost of living while reducing the competitiveness of local industries.

The opposition also expressed concern that the higher fuel levy could reverse recent gains in inflation.

Dr. Boako argued that increasing production and transportation costs often creates a ripple effect throughout the economy, eventually pushing up the prices of food, manufactured goods and other essential services.

"At a time that Ghana is talking about lower inflation, we should not, by the introduction of a new bill, do anything that has a cascading effect on inflation," he cautioned.

The Minority believes the policy contradicts broader government efforts aimed at maintaining macroeconomic stability and reducing inflationary pressures.

Rather than imposing additional taxes, the Minority urged the government to prioritise more effective enforcement strategies to curb fuel smuggling.

According to the MPs, tighter border controls, enhanced electronic tracking systems, improved monitoring of fuel distribution and stricter compliance measures would better address revenue leakages without placing additional financial burdens on legitimate businesses and consumers.

They insist that tackling illegal activities through improved enforcement would provide a more sustainable solution than relying on tax increases.

As debate over the amended Energy Sector Levies framework continues, the fuel oil levy remains a contentious issue, with government defending it as a necessary measure to protect state revenues while the Minority argues it risks increasing business costs, consumer prices and inflation.