Growth and Sustainability Levy breaches petroleum agreement, could trigger ligation – Petroleum Chamber


The Ghana Upstream Petroleum Chamber is warning that the proposed Growth and Sustainability Levy by government could trigger litigation through the international court as it breaches provisions in the petroleum agreements.

According to the Chamber, it is worried that the government is bent on going ahead to breach these provisions to raise money from what it describes as “creeping taxation”. These concerns were captured in a statement issued by the Ghana Upstream Petroleum Chamber on March 22, 2023.

The Chamber is therefore asking government to reconsider the introduction of the growth and sustainability levy, especially at a time the country is struggling to attract new investments in oil and gas exploration.

The Chamber added that “the industry considers this levy as the latest in a series of crippling taxation that is affecting the economic balance of petroleum agreements.”

Some of these taxes include, “ the COVID-19 Recovery Levy, Ghana Education Trust Fund Levy, National Insurance Levy, the 1% Local Content Fund Levy and several others,” the Chamber disclosed.

It added that “this new tax disregards the importance of the preservation of contract sanctity to the promotion of new investment.”

The Chamber was also worried that “unpredictability of the fiscal terms of our petroleum agreements will disincentivize new oil and gas investment at a time when financial institutions are curtailing investment in fossil fuels.”

How oil and gas firms will be affected by the levy

The Ghana Upstream Petroleum Chamber in the statement maintained that provision for a 1% tax on gross production for oil and gas companies, represents an increase in royalty for all intents and purposes.

It also revealed that there is also a 5% tax on profit before tax that applies to the oil and gas service companies meaning taxes will be imposed irrespective of the financial performance of the target business.

“Introducing additional taxes at a time when the industry is going through challenging times is rather unfortunate, anti-business and risks the collapse of indigenous oil service companies as well as trigger disinvestment by International Oil Companies” the Chamber stressed.

Officials of the Chamber on the Levy

“This Growth and Sustainability Levy will damage investments”, commented Joe Mensah, Senior Vice President of Kosmos Energy Ghana, and Chairman of the Upstream Petroleum Chamber.

In his comments on the issue, the CEO of the Upstream Petroleum Chamber, David Ampofo, said “this new tax is an increase in royalties in disguise and an imposition that will inhibit further the growth of our service companies”.

The Chamber is worried that the lack of stability and predictability on a matter as important as tax, means businesses cannot even be sure what their investment returns are likely to be.

It is in Ghana’s continued interest to encourage exploration and development of its hydrocarbon reserves by attracting foreign capital, but there are taxation impediments that need addressing, and crippling taxes such as this are an example.

The Chamber noted however, that it is ready to join hands with affected parties to engage government on this matter.

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