VAT on electricity: Several organizations and individuals have vocally opposed the government’s plan to tax electricity with value-added taxation (VAT).
The Trades Union Congress (TUC) has intensified its opposition by threatening the government with a seven-day ultimatum, demanding that the charge on electricity for residential consumers be removed.
The enactment of a value-added tax (VAT) on domestic electricity consumers, according to labor unions, would exacerbate the situation of Ghanaians who are already struggling and result in an estimated 15% increase in electricity prices.
The TUC Secretary-General, Dr. Yaw Baah, emphasized how urgently the government must remove the VAT or risk the fury of workers.
The International Monetary Fund (IMF) backed the government’s post-COVID-19 agenda for economic growth, which included the adoption of value-added tax (VAT). The government cited a letter from the Ministry of Finance to bolster its explanation.
Notwithstanding this justification, Dr. Baah underlined the grave consequences, saying that residential users would likewise be liable to the 15% VAT if their consumption exceeded the minimum of 30 kilowatt hours per hour.
The TUC, in light of this, has given the government until January 31, 2024, to revoke the Finance Minister’s order to the Northern Electricity Distribution Company (NEDCo) and the Electricity Company of Ghana (ECG).
VAT on electricity: Political Figures Weigh In
In line with worries that the electrical value tax may exacerbate Ghanaians’ already dire financial situation, former president John Dramani Mahama expressed his support for organized labor.
Mahama underlined that this action may raise tariffs by almost 21%, which would have an impact on the cost of goods, services, and transportation.
The government’s decision was also criticized by independent presidential candidate and former Trade and Industry Minister Alan Kwadwo Kyerematen, who noted that the introduction of new taxes was inappropriate given the current problems and would worsen the situation of common Ghanaians.
Electricity Company of Ghana’s Concerns
The implementing agency, the Electricity Company of Ghana (ECG), has expressed concerns regarding the law imposing the tax.
The Managing Director, Samuel Dubik Masubir Mahama, emphasized the technical difficulties, particularly in the implementation of VAT on pre-paid electricity consumers, referring to it as a “nightmare.”
The Industrial and Commercial Workers Union (ICU) has also supported the petition of organized labor for the government to do away with the 15% value-added tax (VAT) on electricity.
The General Secretary for ICU, Morgan Ayawine, questioned the need to impose a value-added tax (VAT) on electricity given the burdensome nature of current taxes on an already overworked populace.
As the government faces mounting pressure from labor unions and political figures, the coming weeks will be crucial in determining the fate of the contentious VAT on electricity in Ghana.