Editorial by Ghanaian Times: Let’s jaw-jaw on implementation of VAT on electricity

Peace, harmony, and tranquility are sine qua non to building progres­sive and inclusive democratic governance, and indeed, these elements are key in ensuring a conducive environment in elec­tion year.

The government as part of mea­sures to mobilise revenues to tackle the numerous economic challenges facing the country, introduced VAT on electricity in accordance with its medium-term revenue strategic policy.

Indeed, the Ministry of Finance has issued a letter directing the two main electricity distribution companies – Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCO), to start the implemen­tation of VAT on residential cus­tomers, who consume electricity above lifeline.

The letter succinctly stated that as part of the implementa­tion of the government’s medi­um-term revenue strategy and the IMF-supported post-COVID-19 program for economic growth (PC-PEG), the implementation of VAT for residential customers of electricity above the maximum consumption level specified for block charges for lifeline units in line with section 35 and 37 and the first schedule (9) of VAT Act, 2013 (Act 870) has been scheduled for implementation, effective January 1, 2024.

For the avoidance of doubt, the letter dated December 12, 2023, pointed out that VAT is still exempt for “a supply to a dwelling of electricity up to a maximum consumption level specified for block charges for lifeline units” in line with sections 35 and 37 and the first schedule (9) of Act 870.”

The issuance of the letter to the two electricity providers for the im­plementation of VAT on electricity on residential consumers above lifeline as part of the government’s medium-term policy has triggered agitation on the labour front.

The General Secretary of the Trades Union Congress, Dr. Yaw Baah, contended that the cost of electricity would go up by mini­mum 15 percent and all residential customers, who consume above the lifeline of 30 kilowatts hour, would pay 15 percent VAT, there­by exacerbating the cost of living in the country.

The organized labour union insisted that VAT on electricity must be withdrawn, and threatened to go on demonstration to compel the government to halt the imple­mentation of the policy.

Similarly, addressing a press conference in Accra, the Chief Executive Officer (CEO) of Consumer Protection Agency, Kofi Kapito, said the group would resist any attempt by the government to introduce what he described as “killer tax” on electricity users.

Consequently, the Finance Min­istry has issued a press statement noting the concerns of organised labour on the implementation of VAT on the consumption of electricity by residential customers, hinting at extensive dialogue to be held with organised labour and other key stakeholders in the coming weeks, to ensure stakeholder buy-in.

We at Ghanaian Times take a se­rious view of these threats, because of the implication on industrial harmony and peace of the country, especially in an election year.

We believe that not much has been done towards building a national consensus, especially with organ­ised labour on the implementation of the policy.

It is, therefore, our considered opinion that the government jaw-jaw with organised labour, to reach a consensus for the benefit of both parties so that the policy does not bring a further burden on the ordinary Ghanaians who consume electricity.