The International Monetary Fund (IMF) has indicated that the government may resume the suspended 15% value-added tax (VAT) on electricity if inflation continues to fall.
The government first postponed the introduction of the energy VAT due to widespread public outcry, particularly from home users who were concerned about the financial hardship it would create.
The household electricity VAT was first implemented as part of a series of revenue-generating initiatives to aid with the IMF-supported COVID-19 recovery efforts.
Former Minister Ken Ofori-Atta signed a letter from the Ministry of Finance on January 1, 2024, instructing the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCo) to apply VAT on residential customers who surpass a specific usage threshold.
However, the government postponed the VAT’s scheduled implementation on February 7, 2024, when Organised Labour threatened a statewide rally against the tax. Organised Labour threatened to hold a demonstration on February 13, 2024, if the policy was not totally removed.
The Ghana Statistical Service recently announced that annual inflation fell to 20.9 percent in July, the lowest level in 28 months, from 22.8 percent in June.
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As inflation falls, the issue of restoring the electricity VAT is still being discussed.
The IMF stated in its July 2024 Country Staff Report that the government is likely to proceed with the VAT strategy after inflationary pressures subside.
