GRA explains why SML was contracted for services in the upstream petroleum sector

The Ghana Revenue Authority (GRA) has provided detailed explanations on the rationale behind contracting Strategic Mobilisation Ghana Limited (SML) for its operations in the upstream petroleum sector.

According to the authority, the decision to engage SML was driven by the need for enhanced efficiency, improved measurement systems, and increased revenue collection in the petroleum sector.

This comes after an investigative piece by an Accra-based media house, accused the authority of signing a $100 million contract with SML even though it presented false documents.

In response, the GRA denied the allegations and stated that the contract it has with SML is a risk-reward contract, meaning the authority does not bear any financial commitment in the investment chain, and SML is not exempt from duties and taxes.

The statement by the authority also went on to provide a justification for engaging SML to monitor the upstream of the petroleum sector.

“Prior to the engagement of SML, GRA operated a manual system for the measurement of fuel in depots. The use of dipsticks for measurement was archaic and posed a risk to officers who climbed a ladder to measure the fuel in the tankers. It was inefficient and prone to revenue leakages,” the GRA said.

“Currently, oil deposited by the Bulk-Oil Distribution Companies in the depots is measured by SML with the aid of sensors installed on the depots (Red flow metres). During offloading from the depots, SML again measures all the various liftings of the Oil Marketing Companies (OMCs). All these pieces of information are captured and reconciled with data from the ICUMS. This is done with the GRA petroleum unit. If there are discrepancies, Customs inform the OMC to enter a post-entry to correct the differences,” part of the statement read.

In emphasising the impact of SML's work, GRA noted a substantial increase in reported figures in the downstream petroleum sector.

“SML in the petroleum sector provides additional data independent of the Customs ICUMS data capable of validating anomalies in quantities imported, discharged and accounted for by way of taxes. The revenue assurance exercise undertaken by EY Ghana and later by the Revenue Assurance and Compliance Enforcement (RACE) of the Ministry of Finance confirmed systemic deficiencies in the accounting and collection of petroleum taxes between 2015 and 2020.

“The mode of transmission of data from various sources and systems was fraught with inconsistencies resulting in loss of revenue. Extensive reconciliation had to be done on the various platforms and institutions within the Petroleum Downstream value chain to collect revenue that would have otherwise been lost,” it continued.

… “The work of SML over the period has led to a significant increase in the figures reported in the downstream petroleum sector, from an average of 350 million litres per month in 2018 and 2019, to 450 million litres per month from 2020/2021. This represents over a thirty- three per cent (33%) increase in volume reporting and an average of an extra 100 million litres per month at a levy rate of GH¢1.44. The extra revenue variance gained for the two (2) years will exceed GH¢3 billion. This performance is attributable mainly to the introduction of ICUMS and SML systems,” the GRA explained.

Read the full statement below:

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