Ghanaians and Taxes: Ghanaians are on the warpath again over another new tax. It is very obvious that genetically, Ghanaians are allergic to paying taxes, yet they will always demand government to satisfy their demands.
The mandate of government is to provide for the people and this can be achieved only when there are funds available. And government can largely acquire money through taxes, levies and commissions. So, it is back to the people.
Our problem may be derived from the fact that this nation was brought up in socialism, where everything is for the state and the state must provide for everybody, while everybody stands just there demanding hand downs from the state.
So, it was when the E-Levy was introduced, the then opposition NDC became heroes of the people by saying “No,” to it and forced the NPP government to reduce the rate from 1.5% to 1.0%. And even that the NPP was seen to be anti-poor.
By the way, how can Art. 8(7c) of the NDC 2020’s People Manifesto be interpreted, if by intending to introduce a uniform transaction fee policy for electronic payments did not mean another form of E-Levy?
I believe the tax net must spread for every working Ghanaian to be taxed, but the poor must be taxed very reasonable, so that they can afford to pay without trusting them into further worse conditions. For example, the pure water seller by the road side could be made to pay the cost of one sachet of water as tax every month.
But this requires political will and it seems no government has the will to implement this. And yet, you find people who have never ever paid tax, condemning governments for wasting the tax payers’ money.
The Energy Sector Levy Debt: Ghana under the Rawlings’ NDC witnessed lots of financial challenges. So it was, when H.E. J.A. Kufuor of the NPP took over a country so broke and heavily indebted that Hon. Spio Garbah of the NDC publicly wondered where the new government would get money to pay salaries. But things turned out for the good to the glory of God the Father.
Kufuor was able to tackle the financial mess and pushed Ghana towards a middle-income country. Among things he tackled were the huge debt in the energy sector.
Besides getting private energy providers on board, Kufuor introduced the LED energy saving bulbs to replace the tungsten ones. The LED is over five times more efficient than the tungsten ones and uses less energy.
By the time he handed over power, Ghana’s energy sector levy debt was $940 million.
Then the Mills/Mahama regime took over and the energy sector faced crisis. Dumsor spread over almost five years and the government entered into agreements with private sector energy providers.
Among measures taken, the state went into contractual agreements with private power generating companies who installed capacity over and above the national requirement of electricity per megawatts.
As things stood to this day, Ghana is mandated to pay for the unconsumed electricity. It is like the colonial tax the Francophone countries pay to France.
According to Benjamin Boakye, Executive Director of African Centre for Energy Policy (ACEP), this will make Ghana continuously have a mounting energy debt. For example, our available installed electricity generation capacity is 4,399 MWand in 2018, our peak consumption was about 2,500 MW, meaning over 1,800 MW excess, which was not consumed, had to be paid for.
It was therefore not surprising that in 2016, our energy sector levy debt rose over $1.5 billion to $2.5 billion, from $940 million. This represented the debt we owed for something we never purchased.
The Nana Addo administration was made aware, by the Bretton Woods Institution, that if drastic measures were not taken, the energy sector levy debt would balloon to $12.5 billion by 2022. Measures were taken and by 2024, the debt according to the former president was at $2.5 billion. But today, the energy minister, Hon. Jinapo is insisting it was $3.0 billion. Okay, let us even accept that the debt was $3.0 billion. It only means that only $500 million was added on to what the NDC handed over to the NPP in 2016. In 2008, NPP’s Kufuor handed over an energy debt of $940 million to the Mills/Mahama administration of the NDC and by 2016, it added on $1.56 billion and handed it over to the NPP’s Nana Addo administration.
The question is still, why do we pay for something we have not consumed? Who got Ghana into such an arrangement?
In the first place, I seem not to understand this thing about excess capacity and I will need a lot of education, here. Electricity production is not like water production where excess can be stored. This is how I understand it. A generating plant has a capacity to generate electricity. So, if a plant’s capacity is 2,000 MW, it can provide electricity within that capacity and nothing more and if the demand on it is say 1,200 MW, that is what it will generate. It cannot generate the remaining 800 MW, so why should a customer pay for power that has not been generated? And most importantly, the remaining capacity cannot be stored. Ghanaians need more education on this.
How to Manage our Energy Debt: If we follow the economic policy of all-things-being-equal, or the arithmetic principle of if-more-less-divide, then calculating from the resulting energy debt the Mills/Mahama administration added on to what it inherited from the Kufuor administration, then by 2028, our energy debt will about 2.66 times what it is today and here we are talking not less than $7.9 billion. If this should be the case, then how much total national debt will there be?
There are two ways that I can suggest we tackle this energy sector legacy debt. First is to go back to the negotiating table and remove that clause which mandates Ghana to pay for energy she never consumed. Or even further, since the energy producer(s) insisted they generated that electricity, then Ghana should get free supply to cover that quantity, which was earlier paid for.
Looking at things, it could be obvious that the excess capacity produced, could be sold to another consumer while Ghana pays for the same product which we did not consume.
The second suggestion, as to how to lift the burden off the necks of Ghanaians, will require amendments done to the petroleum price index. In this index, there are a total of twelve taxes, levies and margins, in Ghana pesewas, placed on every litre of fuel. We have the energy debt recovery levy, road fund levy, energy fund levy, price stabilization and recovery levy, sanitation and pollution levy, energy sector recovery levy, special petroleum tax, primary distribution margin, Bost margin, fuel marking margin, marketers’ margin and dealers (retailers/operators) margin.
All these are applied to MGO, Gas Oil to Rigs and Gas Oil to the Mines. Government can add on the new levy to all these twelve areas to relief the ordinary Ghanaian from nuisance taxes. Notably at least two of the levies, the road fund levy and sanitation and pollution levy, can be rebranded, because tolls at toll booths and DVLA fees can take care of the road funds and the assemblies can generate sanitation and pollution levies by collecting fees from residents.
The newly amended energy sector legacy debt levy should not be seen as a result of mismanagement by the previous administration, for so long as nothing is done to that mandated clause in our agreement with power suppliers, there is no way, we can pay off that debt.
The question is, how did we ever get ourselves into such a contract? Fuel prices which have drop will now rise and the commercial drivers will be back at demanding previous fares.
As it is now if a commercial driver purchases ten gallons or forty-five litres of fuel, he is mandated to add an additional GH¢45.00. If forty-five litres of petrol and diesel cost GH¢563.40 and GH¢584.10 respectively, then the additional tax could have purchased more than three and a half litres of fuel.And if these amounts were transferred during the E-Levy era, then the sender will pay GH¢5.63 and GH¢5.84 respectively. So, paying less than GH¢6.00 on E-Levy or paying GH¢45.00 on energy sector legacy debt tax,which of these is anti-poor?
Oh, these politicians! The value is the same. Attack your opponent in power for doing something and come to power and repeat or worsen the same thing done, but justify it.
Hon. Daniel Dugan
