The government has officially announced the suspension of the planned implementation of a 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 charging of the levy, as stated in a press release issued on Wednesday, February 7, 2024.
This suspension is aimed at facilitating extensive dialogue and obtaining the support of industry players and labor unions, in response to significant concerns raised regarding its potential impact on consumers and businesses.
The Ministry emphasized the need for further engagement with key stakeholders, including organized labor, before proceeding with the implementation.
Initially, the government had instructed the imposition of this tax policy on electricity customers exceeding specified consumption levels from January 1, 2024, to support revenue mobilization efforts under the country’s Medium-Term Revenue Strategy and the IMF-Supported Post-COVID-19 Program for Economic Growth (PC-PEG).
However, this decision faced strong opposition from various interest groups who criticized it as punitive and poorly conceived.
Reports suggested that the government was contemplating discussions with the IMF to address the anticipated revenue shortfall, potentially leading to a suspension of the VAT on electricity.
The Ministry expressed its anticipation that these dialogues would result in innovative, comprehensive approaches to bridging the fiscal gap while enhancing economic resilience.
Organized labor had planned a nationwide demonstration on February 13, 2024, calling for the withdrawal of the directive to implement the 15% VAT on residential electricity consumption.
Earlier this week, members had worn red bands at work as a symbolic gesture indicating the possibility of a nationwide strike if the VAT directive remained in place following the demonstration.
