Government Formally Halts Contentious 15% VAT on Electricity

The government has officially suspended the planned implementation of the 15 percent Value Added Tax (VAT) on domestic electricity consumption. This decision, communicated through a press statement from the Ministry of Finance on February 7, 2024, directs both the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to halt the levy’s charging.

The suspension comes amidst widespread concerns raised about the potential impact on consumers and businesses. The Ministry aims to engage extensively with industry players and labor unions to address these concerns and garner their support.

The initial directive to impose the VAT on electricity customers above specified consumption levels was intended to support the country’s revenue strategy and the IMF-Supported Post-COVID-19 Program for Economic Growth. However, opposition from various interest groups deemed it punitive and poorly conceived.

Government is now considering engagements with the IMF to find consensus on the anticipated revenue shortfall and possibly suspend the VAT on electricity. The Ministry emphasizes the need for innovative and inclusive approaches to bridge fiscal gaps while enhancing economic resilience.

Organized Labor had planned a nationwide demonstration on February 13, 2024, urging the withdrawal of the VAT directive. This move follows earlier signals of a possible nationwide strike if the directive is not revoked.