Ghana's government has decided to halt its plans to impose a 15% tax on electricity, following widespread public outcry over concerns that it would exacerbate the already challenging cost-of-living situation.
Initially, the value-added tax (VAT) was slated to apply to domestic electricity consumers, but faced with strong opposition from labor unions, the government has opted to defer its implementation pending further discussions to address the contentious issues.
The decision to suspend the tax comes in the wake of mixed reactions to the recent introduction of a fuel emissions levy, which now requires Ghanaians to pay an annual fee based on the carbon emissions produced by their petrol or diesel vehicles.
There are apprehensions among critics that these additional taxes could further strain the struggling economy, particularly by driving up prices for essentials like fuel.
In a statement issued by the finance ministry, the directive to postpone the VAT implementation was directed at the two main power distributors, Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), to allow for extensive dialogue and engagement with industry stakeholders and labor unions.
However, despite the government's announcement, the Trades Union Congress (TUC) asserts that they have not received official communication about the decision. Consequently, plans for nationwide protests against the tax, scheduled for the following week, remain in place.
The TUC emphasizes that the introduction of additional taxes would burden both families and businesses, further aggravating the already high cost of living and the challenging business environment.
Ghana is currently grappling with one of its most severe economic crises in recent memory, prompting the government to seek avenues to increase revenue. This includes a $3 billion bailout program with the International Monetary Fund (IMF) aimed at mitigating the crisis.
The country's ongoing power challenges, known locally as "dumsor," underscore the importance of effective energy management. Despite Ghana's reliance on hydro, thermal, and gas sources for electricity generation, inadequate maintenance and occasional shortages continue to disrupt power supply.
In summary, the government's decision to pause the implementation of the electricity tax reflects a recognition of public concerns and the need for further consultation to address the broader economic challenges facing Ghana.