Over GHS25m lost to illicit oil trade in 3 years – CBOD

Government’s inability to track the sales and movement of petrol-based products on the local market has created the space for illegal trading of the commodity, costing the economy over GH¢25million between 2015 and 2018, according to a report released by the Chamber of Bulk Oil Distributors (CBOD).

The illegality recorded an unreported tax receipt of GH¢1,066.21million between 2015 and 2018 and an unaccounted sale of tax value of GH¢1,390.73million for 2015 to 2017.

Such illegal trade activities mainly comprise smuggling, sales under-declaration as well as re-export and premix dumping.

Re-export dumping occurs when products meant for export find their way back into the country.

Such products do not attract taxes and therefore pose a major revenue loss to the country when dumped back in the market.

Smuggling, on the other hand, is the delivery of fuel products into the country through unapproved routes or the non-declaration of deliveries through approved routes.

Also, CBOD’s tax analysis based on official trade volumes data from the NPA showed that government reported petroleum taxes were less by GH¢433.75m for 2018, GH¢394.44m for 2017 and GH¢238.02m for 2016.

To get the situation in check, the Chamber has recommended for government to effectively follow the petroleum product stock.

“For an industry that accounts for over 12% of annual tax revenue and has the stock movement as its tax base, the foremost step required is to follow the stock.

“Perpetrators of the illegal trade have thrived significantly because of the absence of coordinated monitoring for stock movements and the enforcement of accountability mechanisms,” the report stated.

The CBOD report also asked for a ban on importation of all petroleum waste, and open visibility in the tracking system for all industry players.

It further stated: “We recommend that a regulatory framework and operating code of conduct be put in place for inspectors and supplying international oil traders. This will deepen government’s ability to effectively monitor stock movements”.

The report further suggested that government must criminalise, arrest and prosecute all illegal peddlers of petroleum products.

Also, where fines and penalties are applicable, they should exceed the full cost of the tax evasion and should be applicable on the total volumes traded by the entity, according to the report

Legacy Debt

Chief Executive Officer of the National Petroleum Authority, Hassan Tampuli, in his remarks at the report’s launch indicated that progress has been made on government’s legacy debt to BDCs with the payment of all outstanding principal sums (US$427.11m) and validation of the interest components.

This amounts to a total of US$806.25mn in subsidies incurred by government through its subsidy policy between 2011 and 2015.

A total of US$929.58m has been paid between 2011 and September 2019, with a total of US$52.62m outstanding and expected to be paid by end of 2019.

Growth

According to the NPA boss, annual growth in consumption of petroleum products reduced by 9% in 2016, increased by 6% in 2017 and reached its highest so far in 2018. 2018 saw a 15% growth in consumption from 3.4 million tonnes in 2017 to 3.9 million tonnes in 2018.

This, he said, rode on the back of successes realised in the fight against illicit petroleum trade, thereby increasing official demand for gasoline, gas oil and LPG.

“This volume of consumption is the highest observed to date, and it bears eloquent testimony to significant occurrences of economic activities anchored on the enabling environment provided by government through deliberate policy initiatives aimed at propelling private sector growth since petroleum drives economic activities.

“It is also a testament of significant successes in the NPA’s efforts toward curbing illicit fuel activities in the country,” he noted.