Professor of Finance at Andrews University, Williams Kwasi Peprah, has sounded a clarion call regarding the fiscal stability of the state, warning that the proposed 40% reduction in petroleum taxes and margins would lead to an unsustainable dip in national revenue.
According to the finance expert, such an aggressive slash in the tax code currently being pushed by various stakeholders to mitigate rising pump prices could cannibalize approximately 35% of government-specific revenue from the energy sector alone.
“However, I also support a reduction, but the request for about 40% in total is really on the high side. We know that users of petroleum transport operators and the rest definitely will increase their prices, but the offset is not going to benefit government in any way.”
Prof. Williams Kwasi Peprah
Prof. Peprah noted that while the government has considered short-term interventions to address the immediate outcry over fuel prices, the magnitude of the requested 40% cut is “really on the high side.”
He argues that every line item within the petroleum tax structure serves a vital purpose in the national budget, and removing them so haphazardly creates a vacuum that the state cannot easily fill.
The professor highlighted a critical disconnect in the current demand: while transport operators and end-users would see a momentary price drop, the “offset is not going to benefit government in any way,” effectively draining the treasury while global market volatility continues to exert pressure.
He proposed a more balanced 20% total reduction as a “fair deal,” which would protect essential revenue while providing a necessary cushion for a four-week trial period.
Fiscal Implications and the “CSO Trap”
The calls by Civil Society Organizations (CSOs) for a near-halving of petroleum taxes, if granted, would likely leave the government in a precarious “fiscal trap.”
Research suggests that petroleum taxes are not merely “nuisance taxes” but are tied to specific sinking funds and statutory payments.
Granting a 40% reduction would necessitate a freeze on numerous “projects that are being done to benefit Ghanaians,” including road maintenance and energy sector debt servicing.
Prof. Peprah’s suggests that by targeting such a high percentage, the government risks losing its ability to intervene in the market later, should the geopolitical situation specifically the “effect of the war” deteriorate further.
This “short-term decision” could lead to a long-term deficit that hampers the green transition, as funds earmarked for renewable integration and energy efficiency are often the first to be diverted when core revenue fails.
A Strategy for Long-Term Energy Stability
Prof. Peprah is urging a shift in perspective, moving away from reactive four-week planning cycles toward a more robust two-month strategic window.
He maintained that “the effect of the war is not going to end now,” and therefore, any tax relief must be sustainable over a longer duration rather than a “short-term basis” fix that expires just as the next price hike hits.
By opting for a 20% reduction instead of the 40% demanded by critics, the government can maintain a fiscal buffer.
This approach allows the state to stay solvent while acknowledging that “users of petroleum transport operators and the rest definitely will increase their prices” if no action is taken.
A more conservative reduction ensures that the state remains a viable partner in the energy sector, rather than a bystander with an empty purse.
Balancing Public Relief with National Development
Ultimately, the debate over petroleum taxes is a debate over the future of Ghanaian development.
As Prof. Peprah warned, the “demand being put forward” threatens to hit the government where it hurts most: its ability to fund its own agenda. While a reduction is necessary to prevent a cost-of-living crisis, the professor insists that we “should not think just in four weeks.”
A 40% cut is an invitation to fiscal instability, whereas a 20% reduction offers a pragmatic middle ground. For the energy and green transition sector, this stability is paramount.
Without the revenue generated from these “very important” line items, the capital-intensive shift toward a greener, more resilient energy grid may be delayed by years, leaving the country even more vulnerable to the next global fuel shock.
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