The Center for Environmental Management and Sustainable Energy(CEMSE) has called for a more balanced and targeted approach to tax reductions on petroleum products, as Ghana grapples with rising fuel prices linked to global market tensions.

In a policy proposal, the organisation highlighted sharp increases in fuel prices between February and April 2026, driven partly by geopolitical developments involving Iran and its allies.

Diesel prices surged by 63 percent, rising from GHS10.47 to GHS17.10 per litre, while petrol increased by 36 percent and liquefied petroleum gas (LPG) by 18 percent.

The price hikes have triggered concerns across multiple sectors, particularly among commercial transport operators, who are pushing for fare adjustments.

Analysts warn that sustained increases could also worsen inflation and threaten macroeconomic stability.

Call for Product-Specific Tax Cuts

The think tank criticised the government’s current tax relief measures as lacking clarity and structure, arguing that uniform tax cuts may not effectively address the varying price dynamics of different petroleum products.

Instead, it proposed a product-specific tax regime, recommending a GHS0.50 per litre reduction on petrol and a GHS1.00 per litre cut on diesel.

The group believes this targeted approach would better reflect consumption patterns and reduce market distortions.

The proposal also includes a temporary relaxation of the Cylinder Recirculation Margin to further ease pressure on LPG consumers.

Revenue Implications

According to the analysis, the recommended tax cuts would result in an estimated monthly revenue loss of about GHS422 million.

This includes GHS142 million from petrol and GHS253 million from diesel, alongside additional losses from adjustments to LPG-related margins.

To offset the potential shortfall, the organisation suggested leveraging windfall revenues from Ghana’s upstream petroleum sector, as well as surplus funds from the Unified Petroleum Price Fund (UPPF).

Balancing Relief and Fiscal Stability

The think tank emphasized that while consumer relief is necessary, it must be carefully balanced with fiscal discipline.

It argued that a targeted tax approach would provide immediate relief to consumers while safeguarding government revenue and economic stability.

The group concluded that adopting a differentiated tax strategy for petroleum products would better position Ghana to manage fuel price shocks without undermining long-term fiscal sustainability.