VAT On Electricity Risks Reinstatement

The International Monetary Fund (IMF) has hinted that it may impress on the government to reinstate the suspended 15% Value-Added Tax (VAT) on electricity should the rate of inflation persist to decline.

Government, it would be recalled, paused the implementation of the VAT on electricity initially owing to public protest, particularly from residential consumers.

The VAT on residential electricity was initially introduced as part of a series of revenue-generating measures under the IMF-supported COVID-19 recovery efforts.

The Ministry of Finance, per a letter signed by former minister Ken Ofori-Atta, dated January 1, 2024, instructed the Electricity organization of Ghana (ECG) and the Northern Electricity Distribution organization (NEDCo) to apply the VAT to residential customers exceeding a certain consumption level.

However, its planned implementation was suspended on February 7, 2024, after Organised Labour threatened a nationwide demonstration against the tax. Organised Labour earlier warned that it would proceed with a protest on February 13, 2024, if government did not fully withdraw the policy.

According to the Ghana Statistical Service, in its latest report, annual inflation had decreased to 20.9 % in July, the lowest rate in 28 months, from 22.8 % in June.

In its July 2024 Country Staff Report, the IMF indicated that the government was likely to proceed with the VAT policy once inflationary pressures dipped.Daily Guide