The recent introduction of a new fuel levy in Ghana, termed the “dumsor levy,” has ignited a debate about its economic impact and its comparison to the now-defunct electronic transaction levy (e-levy). The dumsor levy, officially enacted through the Energy Sector Levies (Amendment) Bill, 2025, adds a GHS1 charge to every litre of fuel purchased, aiming to address escalating debts within the energy sector. This new levy has drawn criticism, particularly from Dr. Mahamudu Bawumia, former Vice President and a leading figure in the New Patriotic Party (NPP). He argues that the dumsor levy places a significantly heavier burden on Ghanaians than the e-levy, which his party opposed and ultimately repealed. He calculates that the dumsor levy represents a tax of GHS83 for every GHS1,000 of fuel purchased, compared to the e-levy’s GHS10 tax on every GHS1,000 transaction. This characterization frames the dumsor levy as eight times more burdensome than its predecessor.
Dr. John Kwabena Kwakye, Director of Research at the Institute of Economic Affairs (IEA) and advisor to the Governor of the Bank of Ghana, challenges this comparison. He contends that the fundamental difference lies in the application of the levies. While the e-levy targeted money transfers, which he deems erroneous, the dumsor levy is applied to an economic transaction – the purchase of fuel. This distinction is crucial, as taxes are typically levied on income, transactions, or assets. Dr. Kwakye’s argument implies that the dumsor levy is a more appropriate application of taxation principles than the e-levy. This debate highlights the complexities of tax policy and its perceived impact on citizens.
The comparison between the e-levy and the dumsor levy requires a nuanced understanding of their structures and intended purposes. The e-levy, a 1.5% tax on electronic transactions above GHS100, was designed to broaden the tax base and generate revenue for government initiatives. However, it faced widespread opposition due to concerns about its potential impact on financial inclusion and its perceived burden on lower-income individuals who rely heavily on mobile money transactions. The dumsor levy, on the other hand, targets a specific sector – energy – and is explicitly intended to address the growing debt burden within that sector. This debt, accumulated from various factors including inefficiencies and under-recovery of costs, threatens the stability of Ghana’s energy supply. The dumsor levy aims to provide a dedicated funding stream to address this challenge and prevent future power outages.
Dr. Bawumia’s criticism of the dumsor levy centers on its perceived regressiveness. A regressive tax disproportionately affects lower-income individuals, as they spend a larger portion of their income on essential goods like fuel. While acknowledging the need to address the energy sector’s financial challenges, critics argue that alternative solutions, such as improved efficiency and cost-recovery mechanisms, should be prioritized over imposing additional taxes on consumers. Dr. Kwakye’s counter-argument highlights the principle of taxing economic transactions, suggesting that the purchase of fuel, being a transaction, is a legitimate target for taxation. This perspective emphasizes the need for revenue generation to fund essential services and address critical challenges facing the economy.
The debate about the dumsor levy also raises broader questions about fiscal responsibility and government spending. Critics argue that the government should prioritize efficient resource allocation and expenditure control rather than resorting to new taxes. They point to potential leakages and inefficiencies within the public sector as areas requiring urgent attention. Furthermore, the timing of the dumsor levy, following the repeal of the e-levy, has fueled skepticism and accusations of policy inconsistency. The government’s justification for the levy rests on the urgent need to address the energy sector’s financial crisis and ensure a stable power supply, which is critical for economic growth and development.
The comparison between the e-levy and the dumsor levy underscores the complex and often contentious nature of tax policy. While both levies aim to generate revenue, they differ significantly in their scope, application, and intended purpose. The e-levy, a broad-based tax on electronic transactions, faced criticism for its potential impact on financial inclusion and its perceived regressiveness. The dumsor levy, a sector-specific tax on fuel, is designed to address the energy sector’s debt crisis and ensure a stable power supply. The debate surrounding these levies highlights the need for careful consideration of the economic, social, and political implications of tax policy decisions. Finding a balance between revenue generation, equity, and economic growth remains a central challenge for policymakers.
