Ghana: Government Halts Implementation of 15% VAT on Electricity

Government Halts Implementation of 15% VAT on Electricity
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The Ministry of Finance has announced the official suspension of the planned 15 percent Value Added Tax (VAT) on domestic electricity consumption, following widespread concerns and opposition.

In a press release issued on February 7, 2024, the Ministry directed the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to cease the implementation of the levy until further notice. This decision comes amidst calls for extensive dialogue and consultation with relevant stakeholders, including industry players and labor unions, who have expressed significant apprehensions regarding the potential impact of the tax measure on consumers and businesses nationwide.

“The Ministry hereby instructs ECG and NEDCO to halt the implementation of the VAT directive pending further consultations with key stakeholders, including organized labor,” the statement highlighted.

Effective January 1, 2024, implementing entities such as ECG and NEDCo were initially directed to impose a 15 percent levy on electricity customers exceeding the specified maximum consumption level for block charges on lifeline units. However, the decision faced strong opposition from various quarters, including labor unions, businesses, lawmakers, and the general public.

The government maintains that the tax policy aligns with the Medium-Term Revenue Strategy and the IMF-Supported Post-COVID-19 Program for Economic Growth (PC-PEG), aimed at bolstering domestic revenue generation. Nevertheless, the suspension reflects a commitment to further engagement and consensus-building to address concerns raised by stakeholders.

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