Petroleum product smuggling curbed at last

Following stringent measures instituted by the National Petroleum Authority (NPA) in 2018 aimed at curbing illegal activities of petroleum smuggling in the downstream sector, no losses related to unaccounted stocks have since recorded.

The feat achieved by the NPA is in contrast with a reconciliation of official stocks movement data which revealed that more than 1.018 billion litres of smuggled stocks could not be accounted for from 2015 to 2017.

Importantly, this implies that smuggled stocks in monitored depots must have been trapped as a result of NPA’s regulatory interventions to curb the illicit trade of petroleum products as stocks were only sold through official means.

Instructively, this led to the sale of about 574.25 million litres more than the official stocks saleable, thus saving the country GHc797.49 million in taxes that would otherwise have been foregone and GHc154.93 million in regulatory margins which have yielded a total savings of GHc952.42 million. This is contained in the 2018 industry report launched yesterday by the Chamber of Bulk Oil Distributors (CBOD) in Accra.

This nonetheless did not eliminate the under reporting of taxes on official sales by GHc433.75 million in 2018 after adjusting for tax exemptions and waivers, the report stated.

From 2015 to 2018, total taxes evaded based on official unaccounted stocks stands at GHc1,390.73 million while total under reported taxes based on official accounted sales volume after adjusting for exemptions stands at GHc1,168.33 million.

This implies that the country has lost a total of GHc2,559.06 million in taxes for the period 2015 to 2018 when the petroleum tax regime was materially tightened, first with the Special Petroleum Tax in December 2014 and the Energy Sector Levy Act in December 2015.

According to the Authority, the conversion of the Special Petroleum Tax (SPT) from ad valorem to a specific tax and stringent export reforms including provision of a performance bond at the value of domestic taxes levies and margins assisted in dealing with transfer pricing and export dumping respectively, together with other factors. The report noted that some of the methods used in the smuggling process included dumping of Marine Gas Oil, under declaration of volumes and premix diversion.

“Tax reforms such as inclusion of domestic taxes on the price of MGO foreign cured the problem of MGO dumping from abroad. Heavy fines and sanctions, including suspension of Petroleum Service Providers operations, dealt with the issue of premix diversion and under declaration to a large extent”, the report reiterated.

Speaking during the event, the Chief Executive Officer (CEO) of NPA, Alhassan Tampuli noted that the report provides the regulators and policy makers the opportunity to evaluate the impact of policy on the Bulk Distribution Companies (BDCs) and other players in the industry.