NPA’s illicit fuel trade fight saves Ghana 1bn cedis in 2018

NPA’s illicit fuel trade fight saves Ghana 1bn cedis in 2018

The National Petroleum Authority (NPA), through its interventions in the fight against illicit petroleum trade in 2018, has saved the country close to a billion cedis, according to the 2018 downstream industry report.

The report, put together by the Chamber of Bulk Oil Distributors (CBOD), indicated that the Authority, by dint of its efforts intensified within the previous year, managed to save a total sum of GHC 952 million for the state – specifically, GHC 797 million in taxes and about GHC 155 million in regulatory margins.

The country has been battling with illegal trade of petroleum products and its effects on revenues and state taxes. However, the NPA, with its policy interventions and monitoring operations, has been able to reduce the activities of these illicit traders and consequently, increased state revenues. Available evidence confirms that the NPA, with assistance from the Central Government, has achieved some progress toward tackling the prevailing challenges of fuel smuggling and tax evasion.

NPA’s Chief Executive, Hassan Tampuli, noted that the Authority recorded zero loss in 2018 to unaccounted stocks, but rather realised 574 million litres more than the official saleable petroleum stocks in the country. This suggests that stocks smuggled into official depots could not be smuggled out owing to the surveillance of officials of the Authority. As such, these stocks were sold through the legal channels, hence more taxes for the state on sales of these stocks.

According to the report, from 2015 until the review period, the country had lost substantial amount of stocks annually to the illegal trade. The official national stocks data movement for the three-year period revealed that 54 million litres of petroleum products were lost or could not be accounted for in 2015, as were 164 million litres in 2016 and 794 million litres in 2017.

The Chamber further reported that the associated petroleum tax revenue evasion to these stocks was GHC 1,438 million while the accompanying regulatory margins summed up to GHC 238 million.

The Authority’s intervention in the review period has minimized the evasion of official channels of distribution, hence a resulting increase in the official volumes of the most tax-evaded petroleum products; Automotive Gas Oil (AGO) regular, commonly referred to as ‘petrol’ which saw a 17% increase, and the Premium Motor Spirit (PMS) or ‘diesel’ which went up by 19%.

Petroleum Taxes

Meanwhile, petroleum tax revenue increased due to the reduced illegal trade which reflected in an increase in official volumes. This improvement, however, did not rid the sector of under-reporting of taxes on official sales.

In the three-year interval from 2015 until 2018, total taxes evaded based on official unaccounted stocks pegged at GHC 1,390 while total under-reported taxes based on official accounted sale volume after adjustments and exemptions stood at GHC 1,168. Thus, the country lost more than GHC 2,500 million in taxes alone. Adding this to an evaded regulatory margin of GHC 231 million, the nation lost over a whopping GHC 2,700 in taxes and regulatory margins for this three-year period.

The Way Forward

CBOD’s Chief Executive, Senyo Hosi, at the launch of the report in Accra, said for an industry that contributed more than 12% of the annual tax revenue and had the stock movement as its base, it was important to take proactive steps to secure it.

The first of these is to follow the stock. This should be done by a Petroleum Product Data and Revenue Monitoring Committee, which he urged the Ministry of Finance to constitute. Comprising representatives from the NPA, Ghana Revenue Authority (GRA), CBOD, Association of Oil Marketing Companies (AOMC), ESLA Plc., Ministry of Finance, Ministry of Energy, Tema Oil Refinery (TOR), Ghana Association of Bankers (GAB) and an accounting firm, the Committee will be responsible for providing coordinated monitoring and enforcement of accountability mechanisms.

Ghana’s illicit fuel trade mainly includes fuel smuggling, sale under-declaration, re-export and premix dumping. The Chamber, thus, called for the formulating of a regulatory framework and operating code of conduct to govern inspectors and supplying international oil traders.

It also called for the prevention of shore smuggling by adequately resourcing the navy to effectively patrol the coastlines.

Moreover, CBOD suggested that the efforts to prevent export dumping should not fall on officials of the GRA alone, but be extended to officials from the NPA, the exporters as well as the importing destinations.

Again, it not only wants the Authority to institute stricter punitive measures for perpetrators, but also wants it to consider certain activities of offenders as criminal. For instance, the Chamber wants the identification of a low marker at any filling station to be regarded as a criminal offence as it is an evidence of tax evasion.

Source: Energy Ghana

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