Parliament last Friday passed the Energy Sector Levies (Amendment) Bill, 2026, which will pave the way for the government to tighten tax compliance in the downstream petroleum sector and plug a revenue leakage estimated at more than GH¢1 billion annually.
The Bill, which was read the third time and passed by the House, amends the Energy Sector Levies Act, 2025 (Act 1135) by increasing the Energy Sector Shortfall and Debt Repayment Levy as well as the Road Fund Levy on fuel oil, while introducing new compliance measures to prevent the diversion of petroleum products and abuse of tax exemptions.
Moving the motion for the Bill, the Minister for Finance, Dr. Cassiel Ato Forson, said the government had uncovered a tax evasion scheme involving the misclassification of diesel as fuel oil to exploit lower tax rates.
He disclosed that the practice had already resulted in an estimated revenue loss of about US$25 million between January and June this year.
“There has been a potential revenue loss of about US$25 million in the last six months and this stems from the fact that diesel has been misclassified as fuel oil by certain individuals,” he told Parliament.
Dr. Forson explained that while diesel attracts taxes of GH¢3.35 per litre, fuel oil attracts only GH¢0.25 per litre, creating a tax differential of GH¢3.15 per litre that has encouraged smuggling and tax evasion.
According to him, the government analysis showed that fuel oil consumption had increased abnormally far beyond historical trends.
Using a five-year time series analysis, he said the nation would ordinarily consume about five million litres of fuel oil monthly. However, between January and June this year, reported consumption had risen to more than 20 million litres per month.
“This represents a 493 per cent increase over the last year. The incentive is because there is clearly a huge tax arbitrage. Some individuals are buying diesel, disguising it as fuel oil and collecting the taxes on it,” he stated.
The Finance Minister warned that unless immediate action was taken, the country stood to lose more than GH¢1 billion annually through the illegal practice.
Describing those behind the scheme as “mini-GRAs”, Dr. Forson said they were collecting taxes that rightly belonged to the state and keeping the proceeds for themselves.
“They are selling the product to you as diesel and then collecting the taxes due the state and keeping it to themselves,” he said.
Minority’s Concerns
However, the Minority expressed concerns about the government’s policy choice, indicating that the amendment of the law would impact heavily on the consumer.
According to them, the government was also not convincing about the intended rebate for companies that will pay the approved rate of the fuel oils.
Compliance measure
Yet, the Finance Minister stressed that the amendment was not intended to impose new taxes on consumers but rather to eliminate incentives for tax evasion.
He explained that fuel oil is used mainly by industries and not by motorists, indiciating that instead, the government would replace the current upfront tax exemption for industries purchasing fuel oil with a refund-based system.
Under the new arrangement, industries will initially pay the applicable levies and subsequently claim refunds from the Ghana Revenue Authority (GRA).
Dr Forson said the refund period would also be shortened from the current 90 days to just 14 days.
He explained that smugglers had since shifted their activities to fuel oil, making the latest legislative amendment necessary to protect public revenue and safeguard the integrity of the downstream petroleum tax regime.
By Ernest Kofi Adu, Parliament House