The KPMG report has indicted the Ghana Revenue Authority (GRA) for providing unreliable data prior to the engagement of Strategic Mobilisation Limited (SML).
According to the KPMG report, data declared by GRA was inconsistent with data provided by the Energy Sector Levy Act (ESLA) and the National Petroleum Authority (NPA).
For example, in 2019, GRA reported 2.8 billion (2,815 million) litres, ESLA reported 4.2 billion (4,205 million) litres, and NPA reported 4.5 billion (4,537 million) litres.
Similarly, in 2020, GRA reported 2.8 billion (2,847 million) litres, ESLA reported 4.1 billion (4,176 million) litres, and NPA reported 4.5 billion (4,500 million) litres.
GRA asserted that prior to the commencement of SML’s operations in May 2020, the annual and monthly average of petroleum liftings were 2.8 billion (2,847 million) litres and 237 million litres, respectively.
According to GRA, this data is based on declarations by taxpayers.
This implies that taxes were not paid on 1.3 billion (1,329 million) litres reported by ESLA and 1.6 billion (1,653 million) litres reported by NPA.
GRA was unable to provide system-generated petroleum liftings data for the period from January 1, 2018, to April 30, 2020, because that period was covered by the Ghana Customs Management System (GCMS), which was not in use at the time of the investigation.
As a result, KPMG said it relied on ESLA data as the most reliable source of GRA petroleum product liftings data available for the pre-SML period.
The full KPMG report, released by President Nana Akufo-Addo, explained that ordinarily, ESLA data should be lower than GRA data as it excludes liftings for re-export, export, and transit.
However, KPMG found that GRA declared data constituted 68% of ESLA data.
Additionally, independent data from NPA was significantly inconsistent with GRA declared data but substantially aligned with ESLA’s dataset.
Consequently, KPMG assessed the data provided by GRA as inaccurate and incomplete.
From May 2020, within the SML era, the reported liftings by GRA are substantially consistent with NPA and ESLA datasets, with minimal differences.
This demonstrates that SML has closed the gap in tax revenues to the state.
During the SML era, there was consistency among GRA, ESLA, and NPA datasets.
KPMG utilized NPA liftings data to analyze the year-on-year growth rate between 2016 and 2023 because pre-2018 data for GRA was not available.
The analysis of NPA data from 2016 showed inconsistent growth rates over the period, culminating in an average growth rate of 2% for the pre-SML era and 4.38% for the SML era.
SML commenced downstream petroleum monitoring services in May 2020, and therefore the year 2020 has been used as a base year to determine the pre-SML and SML era growth rates.
In the absence of complete data from GRA, KPMG utilized three years of data pre- and post-2020 from NPA to determine the growth rates that existed before and after SML commenced.
The analysis showed that the average growth rate for the period 2017 to 2019 (pre-SML) was 2% compared with 4% for the period 2021 to 2023 (SML era).
Factors contributing to changes in the growth rate of petroleum liftings reported by NPA include crude oil prices, new Oil Marketing Companies (OMCs), depots and retail outlets, and improved automated processes.
GRA and SML supported their assertions that the commencement of operations by SML led to incremental volume liftings and tax revenue of GH₵12.98 billion for the period from May 1, 2020, to December 31, 2023.
Upon review, KPMG concluded that the analysis provided by GRA and SML to support the claim of incremental revenue of GH₵12.98 billion revealed that the average pre-SML volume data of 237 million litres used in the analysis is not accurate and complete.
The pre-SML data that GRA should have used for its incremental revenue analysis should have been at a minimum the ESLA liftings average of 348 million litres, which correlates with the NPA average liftings of 375 million litres.
Additionally, the pre-SML average in the model has been held constant while the SML era volumes and related averages are growing at different inherent growth rates.
Holding the pre-SML average constant assumes that all changes in reported volumes during the SML era are attributable to the involvement of SML in the petroleum downstream sector.
This presumption may not be accurate as other factors contributed to the growth in petroleum liftings for both pre-SML and SML era periods.
To account for the impact of other factors in the changes in petroleum product liftings over the period, KPMG stated that the pre-SML average used in its model should be adjusted by the annual inherent growth rate that existed for the reported volumes of liftings for all relevant periods.
Furthermore, it pointed out that the volumes stated for 2023 contained marginal errors.
To address the limitations identified in the computation for incremental revenue by GRA and SML, KPMG utilized the pre-SML averages from the ESLA data and adjusted those averages by the inherent growth rates of volume lifting changes for the relevant periods to determine the incremental tax revenue that may be attributable to the involvement of SML.
Based on analysis using ESLA reported liftings as the pre-SML average, the incremental reported volume that is attributable to the involvement of SML is determined as 1.70 billion litres for the period.
This works out to a monthly average of 38.6 million litres per month.
The incremental revenue that is attributable to the involvement of SML is GH₵2.45 billion for the period.
This works out to approximately GH₵55.68 million per month. The net fee (net of taxes) paid to SML for the same period was GH₵720 million (monthly average of GH₵16.36 million), which constitutes 29.41% of the incremental tax revenue.
The report stated that SML conducts 24/7 electronic real-time monitoring of the outflow and partial monitoring of inflows of petroleum products at depots where SML has its flow meters and ATGs installed and operationalized.
This ensures that the movement of petroleum products outside the depots can be identified and accounted for and also serves as a deterrent for under-declarations.
According to the report, SML conducts six levels of reconciliation to identify avenues that may cause revenue losses to GRA and share discrepancy reports for GRA to follow up on gaps noted. These include SML readings vs. Petroleum volumes lifted, SML volumes vs. Waybills, Purchase Orders, ICUMS volumes (Four-way reconciliation), ICUMS volumes vs. Waybills, OMC lifted amounts in ICUMS vs. BoEs (Bill of Entry), OMC Lifted amounts in ICUMS vs. Tax paid/Ghana.Gov, and OMCs with pending liabilities still lifting/OMC Balance.
For outflows, the KPMG report stated that SML has installed flow meters at 24 out of 26 depots, which serve as an alternate source for GRA to determine the quantities of petroleum products lifted at these locations, distinct from the volumes recorded by NPA and GRA in ERDMS and ICUMS, respectively.
As of December 31, 2023, SML had flow meter readings for 16 out of 24 depots, representing 76% of total petroleum products lifted.
SML’s scanning and storing of approved waybills from February 1, 2022, serves as a digital archive for GRA for easy retrieval of approved waybills.
This is an improvement over GRA’s existing process, where approved waybills were stored in sacks at its physical archive location.
