IMF believes that if inflation decreases, the government may reinstate a 15% electricity VAT.

 

IMF believes that if inflation decreases, the government may reinstate a 15% electricity VAT. The government may reintroduce the 15 percent value-added tax (VAT) on electricity, which has been suspended, if the inflation rate keeps falling, according to the International Monetary Fund (IMF).

The introduction of the VAT on electricity was first put on hold by the government due to strong public opposition, especially from residential users who were concerned about the potential financial burden.

When the COVID-19 recovery efforts were first backed by the IMF, several revenue-generating measures included the inaugural introduction of the VAT on household power.

The Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCo) were directed by a letter dated January 1, 2024, issued by former minister Ken Ofori-Atta, from the Ministry of Finance, to impose the VAT on residential customers who above a specific usage threshold.

On February 7, 2024, the administration did, however, halt the VAT's scheduled introduction because Organized Labor had vowed to stage a statewide protest against the tax. Organized Labour has threatened to hold the demonstration on February 13, 2024, if the policy is not completely reversed.

According to a recent report from the Ghana Statistical Service, annual inflation dropped from 22.8 percent in June to 20.9 percent in July—the lowest figure in 28 months.

The idea of restoring the electricity VAT is still on the table as inflation starts to decline.

According to the IMF's July 2024 Country Staff Report, after inflationary pressures subside, the government is probably going to proceed with the VAT program.