The government has officially suspended the planned implementation of the 15 percent Value Added Tax (VAT) on domestic electricity consumption. The Ministry of Finance has directed both the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to halt the imposition of the levy.
A press statement issued by the Ministry of Finance on Wednesday, February 7, 2024, conveyed that the suspension aims to facilitate extensive dialogue and seek the support of industry players and labor unions. This decision comes in response to significant concerns raised about the potential impact on consumers and businesses.
The statement read, “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 labor.”
Initially slated to take effect from January 1, 2024, the VAT on electricity consumption above the specified maximum level for block charges was intended to support the country’s Medium-Term Revenue Strategy and the IMF-Supported Post-COVID-19 Program for Economic Growth (PC-PEG), with the goal of revenue mobilization.
However, facing opposition from various interest groups who deemed it punitive and poorly conceived, the government decided to suspend the directive. Reports earlier indicated that the government was considering discussions with the IMF to address the anticipated revenue shortfall.
The Ministry expects the engagements with stakeholders to result in innovative, robust, and inclusive approaches to bridge the existing fiscal gap while enhancing economic resilience. Organized Labor had planned a nationwide demonstration on February 13, 2024, urging the government to withdraw the directive, and earlier reports suggested the possibility of a nationwide strike if the VAT directive is not revoked after the demonstration.