…calls for Forensic audit
An ongoing spar of words between the Ghana Chamber of Bulk Oil Distributors (CBOD) and administrators of ESLA-PLC, the special purpose vehicle that mutated from the Energy Sector Levy (ESLA), has entered the stage where CBOD is demanding a forensic audit to ascertain how almost 1billion cedis of ESLA money went missing.
In a 5th June response to ESLA-Plc, which strangely styled itself into a mouthpiece of government and claimed in a statement, in response to CBOD, that the loss of ghc915.79m is due to tax exemptions, CBOD also demanded a public enquiry into the mysterious cash-flight as it makes no sense at all.
“To suggest that over ghc915million (2016 and 2017) of unreported ESLA receipts are due to exemptions is serious and must be a subject of public interest. Ghc915.79mn is equivalent to 14.2% of total ESLA receipts collected between 2016 and 2017,” the CBOD statement noted.
The statement which was signed by Senyo Hosi, the CEO of CBOD, was in response to a June 4th 2018 reaction by ESLA Plc to CBOD’s Industry Report for 2017. Under normal circumstance, it is the government which is supposed to respond to the CBOD’s Industry Report but somehow, ESLA Plc gave itself the benefit of the doubt and played linguist for government.
CBOD had, in that report, raised red flags over the fact that amounts of Ghc576.63million and Ghc339.16million had been unreported in 2016 and 2017 respectively. This means a total amount of ghc916million has not been accounted for.
In response, ESLA-Plc wrote in its counter statement that CBOD had been simplistic in its assessment and that the loss was due to tax exemptions: “Whilst these amounts may have been derived by taking the gross volumes of petroleum products consumed into consideration, a pertinent factor relating to exemptions that have been granted for certain volumes lifted were ignored.
“The gross volumes, which formed the basis of the computations by CBOD, were based on the Oil Marketing Companies (OMC) Performance Statistics report published by the National Petroleum Authority. Whilst this data accurately reflects volumes of petroleum products consumed, they cannot in their entirety be used for the computation of taxes and levies as they do not discount the volumes of petroleum products that are eligible for levy and tax exemptions by law.
“Quite a number of institutions benefit from levy and tax exemptions and these include some mining companies, some thermal power producing companies, some state agencies and some embassies amongst others. E.S.L.A Plc., working together with the National Petroleum Authority, Ghana Revenue Authority and the Ministry of Finance, monitors the volume of petroleum products that benefit from levy and tax exemptions in order to ensure that the appropriate levies are collected from all Oil Marketing Companies. The Annual Report on Management of the Energy Sector Levies and accounts for the year 2017 submitted Parliament by the Minister of Finance discloses accurate data on ESLA levies collected for each period, net of tax exemptions.”
But responding to the statement by ESLA Plc, CBOD expressed surprise that tax exemptions have been determined and conferred on some beneficiary companies on the blindside of stakeholders, including CBOD itself. Even more bizarre, CBOD pointed out that any such tax exemptions may also have happened on contrary to the law which established ESLA.
The law and the facts
Then quoting the ESLA Act 2015 (Act899) CBOD pointed out that any exemption granted to any entity captured under the ESLA law could be illegal. It also showed in its statement, that contrary to the ESLA Plc claim that mining companies have been given exemption; the records show that mining companies captured under the law paid the relevant taxes in the period under review.
Indeed per tables that CBOD published, a total of Ghc213, 575, 516 accrued to ESLA in 2016 from taxes on gasoil used by mining companies. In 2017, a total of Gh285, 300, 832.00 accrued to ESLA in this way.
“The CBOD is unaware of any exemptions granted any industry outside of the E.S.L.A Act and does not deny the possibility of same.
“By this statement, we request that all exemptions granted be made public,” the CBOD statement demanded, adding, “Such magnitude of exemptions also provides an avenue for tax evasion and the perpetuation of the illegal trade under the guise of industry exemptions.”
Almost ghc1.6billion in other losses
Meanwhile, the CBOD’s report that almost ghc1.6 billion was lost due to malpractices was not disputed by ESLA-Plc in its assumed role as government linguist. In its statement, it responded that government agencies are working hard to ensure that such losses do not continue to recur.
“The CBOD report estimates that an amount of Ghc148.93 million was lost due to transfer pricing and ghc1.4billion was lost due to re-export dumping and smuggling. The National Petroleum Authority and the Ghana Revenue Authority have and continue to undertake various actions to address the issue of revenue leakage. These actions include:
“The review of export Guidelines to include, requiring exporters to deposit guarantee bonds with face values equal to the tax that should have been paid on the export products. This has significantly reduced the number of companies exporting petroleum products and the volumes of exports reported, resulting in a reduction in the incidence of fuel dumping.
“The government also imposed taxes on Marine Gas Oil (MGO) foreign petroleum products in January 2018. Since then, there has been a drastic reduction in MGO foreign monthly volumes,” the ESLA statement said.
ESLA, ESLA Plc and government
However, an unsatisfied CBOD was skeptical about ESLA Plc’s spirited defense. It expressed worry about ESLA-Plc’s comfortable entanglement with government when it should be independent.
It pointed out that ESLA-Plc, is a special purpose vehicle that had evolved from ESLA – the Energy Sector Levy that the erstwhile NDC administration had instituted to raise taxes to clear energy sector debts that were crippling the power sector.
It would be recalled that the ruling NPP, while in opposition, had resisted ESLA, saying it was an unnecessary tax that the NDC, was insensitively imposing on Ghanaians. However, after coming into power in 2017, the same NPP then disappointed all expectation: rather than scrapping the tax, it turned it into a special purpose vehicle – ESLA Plc – and has since been using it to borrow money from the international money market by way of bonds.
It is money accrued from the tax functionality (i.e money raised from local levies) of ESLA that the CBOD estimates that almost ghc1billion cannot be accounted for. Even though the tax functionality is different from the loans raised through the special purpose vehicle, ESLA Plc, the same special purpose vehicle is what has jumped up to explain away CBOD’s alert that the close to ghc1billion cannot be accounted for.
CBOD in its 5th June reply to ESLA Plc, pointed out that ESLA Plc has no locus to speak on the tax functionality of ESLA which is to raise money from energy sector players locally. “Since ESLA Plc was formed on the 14th of September 2017, its interest and assessments of the ESLA receipts cover the period September 2017 to date. It should also be noted that not all ESLA receipts are assigned to E.S.L.A Plc. Therefore, it has no capacity to independently assess and validate the accuracy of the ESLA reports submitted to Parliament by the Minister of Finance for the period of January to December 2017.
“The formation of ESLA Plc and the issuance of the energy bonds are a function of recommendations made by the CBOD and the Ghana Association of Bankers as far back as October 2015. We envisaged that for ESLA Plc to be viable as an SPV, it ought to operate independent of political interference. We humbly urge ESLA Plc to maintain the integrity of the energy bond program by focusing on its mandate.
“ESLA Plc is neither the collector/reporter of ESLA receipts nor the mouthpiece for government agencies from 2016 to date. We do not find it in ESLA Plc.’s place to speak to revenue leakages in respect of smuggling, export dumping and transfer pricing,” the CBOD statement underscored.
It emphasized that what it is aiming to kick into motion is a thorough investigation to ascertain how the close to ghc1billion in ESLA receipts from 2016 and 2017 got missing, and that to be able to get to the bottom of the matter it recommends an independent public enquiry.