Parliament Passes Energy Sector Levies Amendment to Curb $25 Million Fuel Smuggling Loss

The Parliament of Ghana has passed the Energy Sector Levies (Amendment) Bill, 2026, a move designed to plug significant revenue leakages in the downstream petroleum sector. Approved on July 31, 2026, the legislation targets an estimated US$25 million (over GH¢1 billion) in annual losses caused by fuel smuggling and the misclassification of petroleum products. Under the administration of President John Mahama, the government introduced the bill to increase the Energy Sector Shortfall and Debt Repayment Levy (ESSDRL) and the Road Fund Levy on fuel oil, specifically aiming to narrow the tax gap between diesel and fuel oil that had been exploited by tax evaders.

Finance Minister Dr. Cassiel Ato Forson defended the amendment, clarifying that it does not represent a new tax for ordinary motorists but is a reform of existing subsidy administration. The legislation transitions the current system to an "ex-post" subsidy model, where industries are required to pay the levies upfront and later apply for refunds. This mechanism is intended to ensure that only legitimate industrial users benefit from subsidies, thereby ending the practice where diesel was mislabeled as fuel oil—which carried a much lower levy of GH¢0.25 compared to diesel’s GH¢3.35 per litre—to avoid higher taxes.

However, the Minority in Parliament has raised sharp objections to the levy increase, which sees the charge on fuel oil rise from GH¢0.24 to GH¢1.93 per litre. Dr. Gideon Boako, the Tano North MP and Deputy Ranking Member on the Finance Committee, warned that the hike would increase production costs for local businesses and contribute to inflationary pressures. The Minority argued that the government should prioritize stronger enforcement and tracking systems over tax increases. Dr. Boako also questioned the transparency of the administration's fiscal management, citing concerns that previous funds from the Energy Sector Recovery Levy had not been used as intended to settle energy sector debts.

The passage of this bill marks a critical attempt by the Mahama administration to modernize tax policy and ensure accountability within the energy sector. While the government maintains that these changes are necessary to address evolving economic challenges and revenue theft, the industrial sector will be watching closely to see how efficiently the new refund process is implemented. Moving forward, the success of the reform will depend on the government's ability to balance revenue mobilization with the need to protect businesses from rising operational costs.