Finance Minister directs ECG, NEDCo to suspend implementation of 15% VAT on electricity consumption

The Ministry of Finance has issued a directive instructing the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to halt the implementation of the 15% Value Added Tax (VAT) directive until further consultations are conducted with key stakeholders, including organized labour.

This decision comes amid ongoing discussions regarding the VAT imposition on electricity and aims to foster inclusive dialogue to address concerns and explore alternative measures to bridge the fiscal gap while enhancing economic resilience.

In a statement released by the Ministry of Finance, it emphasized the importance of engaging with stakeholders to develop innovative and comprehensive strategies to address the fiscal challenges faced by the government.

“Reference is made to the Ministry of Finance’s (MoF) letter to the Electricity Company of Ghana, Ltd (ECG) and the Northern Electricity Distribution Company (NEDCO) on the above subject dated 12th December 2023; as well as MoF’s Press Statement on the subject issued on 30th January 2024.  On behalf of the Government, MoF would like to inform ECG and NEDCO to suspend the implementation of the VAT directive pending further engagements with key stakeholders including Organised Labour”.

“The Ministry expects that these engagements will birth innovative, robust, and inclusive approaches to bridging the existing fiscal gap while bolstering economic resilience,” parts of the statement read.

The Ministry’s directive follows earlier demands from organized labour for the complete withdrawal of the 15% VAT on electricity. With 35 labor unions threatening to organize a demonstration if the government does not retract the controversial levy, the situation underscores the importance of addressing stakeholder concerns through constructive dialogue.

Furthermore, there are apprehensions regarding the potential impact of implementing the VAT on electricity, including its potential to drive inflation upwards and potentially disrupt the government’s macroeconomic targets outlined in the International Monetary Fund-support program.

As discussions continue, it is imperative for all parties involved to collaborate effectively to find mutually agreeable solutions that balance fiscal imperatives with socio-economic considerations, ensuring sustainable economic development and stability in Ghana.