Adnan Adams Mohammed
Government has officially suspended the 15 percent Value Added Tax (VAT) on domestic consumption of electricity.
Power distribution companies in the country; that is, the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), were directed by the Ministry of Finance to implement the policy which has been unpopular and strongly opposed by stakeholders in the country, notable among them are the trade unions and business associations.
The notice of suspension of the implementation of the VAT on electricity policy was contained in a press statement issued by the Ministry of Finance last week. The suspension, according to the Ministry was to allow for extensive dialogue and also to get the buy-in of industry players and labour unions following the grave concerns raised about its impact on consumers and businesses.
“On behalf of the government, the Ministry would like to inform ECG and NEDCO to suspend the implementation of the VAT directive pending further engagements with key stakeholders including organized labour”, the statement noted.
Beginning of the year, government directed the imposition of VAT on electricity customers above the maximum consumption level specified for block charges for lifeline units, to support the country’s Medium-Term Revenue Strategy and the IMF-Supported Post-COVID-19 Program for Economic Growth (PC-PEG) with the aim to mobilize revenue.
But this was opposed by the various interest groups that viewed it as not only punitive but a poorly-thought-through directive.
Earlier reports suggested that government was considering engagements with the IMF for a consensus on the anticipated revenue shortfall for a suspension of the VAT on electricity.
“The Ministry expects that these engagements will birth innovative, robust, and inclusive approaches to bridging the existing fiscal gap, while bolstering economic resilience”, the Ministry’s release concluded.
Organized Labour had planned a nationwide demonstration on February 13, 2024, urging the government to withdraw the directive to implement the 15% VAT on residential electricity consumption.