– ECG MD
The Electricity Company of Ghana (ECG) has addressed concerns surrounding the implementation of the 15percent Value Added Tax (VAT) on electricity consumption exceeding the lifeline threshold.
Managing Director, Dubik Mahama, assured the public that the tax is not currently being charged, citing ongoing discussions with the Public Utilities Regulatory Commission (PURC) to address legal and operational challenges.
The ECG and the Northern Electricity Distribution Company (NEDCO) were on January 1, directed by the Finance Ministry to implement the 15 per cent tax from January 2024.
The Trades Union Congress (TUC) on Tuesday, gave the Akufo-Addo government a seven-day ultimatum to withdraw the imposition of the VAT on electricity consumption above lifeline.
Secretary General Dr Yaw Baah at a press conference vehemently opposed the move, citing its detrimental impact on the livelihoods of ordinary Ghanaians, particularly pensioners and low-income earners.
But speaking on the Citi Breakfast Show yesterday, Thursday, January 25, the ECG boss, Samuel Dubik acknowledged that there are legal and operational challenges associated with the implementation of the new tax and that his outfit is still in discussion with the PURC over the implementation of the VAT.
“It is on record, we have not implemented it, and we are not charging it,” Dubik said, adding, “There are some difficulties that have to be checked with the law so I don’t think that it is time for people to panic, it is not panic mode yet. All of these things have to be cleared out…so the collection has not started, it is still a conversation going on.”
“If a letter doesn’t belong to you and you take and read it, you will attempt to see it in a certain light but those of us whom the letter was meant for our consumption, we understood the letter and we have applied it accordingly, so I can say on authority that it hasn’t been charged, it is a conversation being had, it might even reach a point where the whole law will be looked at and recrafted.”
The government has justified the 15 per cent VAT it is imposing on electricity consumption hoping to raise more revenue as part of its COVID-19 recovery program, and as part of the measures taken, directed the imposition of VAT on electricity.
In a letter dated January 1, Finance Minister, Ken Ofori-Atta, instructed ECG and NEDCO to apply the VAT to residential customers exceeding the maximum consumption level for lifeline units.
Deputy Energy Minister, Andrew Agyapa Mercer in a letter said it was a difficult decision for the government, but it is necessary to do so to clear off debts owed to independent power producers.
“Obviously, if you look at the scope of the tax and what it is intended to do—raise revenue to meet some obligations of the government in the energy sector—it will interest you to know that, as we speak, as of July 2023, the amount of money that we owe to the IPPs alone is in the region of GH¢1.7 billion.”
People, including the Director of Business Operations at Dalex Finance, Joe Jackson, criticised the government’s decision to impose the VAT on consumers, describing it as harsh.
Kofi Kapito, the Chief Executive Officer (CEO) of the Consumer Protection Agency, also described it as ridiculous.
Kapito, criticized the government’s decision to implement a Value Added Tax (VAT) on residential electricity customers who consume above the lifeline units describing the development as an unfair taking of people’s money.
The VAT was announced by the Ministry of Finance in a letter to the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO).
This tax, which started on January 1, 2024, is part of the government’s Covid-19 recovery program.
However, Kapito questioned the rationale behind taxing residential consumers for their electricity usage during an interview on the Citi Breakfast Show on Citi FM.
He suggested that it would be more reasonable to impose the VAT on manufacturers and companies that use electricity for profit.
“This is a ridiculous stealing of the people’s money. It is called a VAT. If a manufacturer, if a company that uses electricity to make a profit is asked to pay tax on it because the government needs the revenue, I am for it. Even as we speak, consumers are buying things like milk and other items from various stores; you go to restaurants, you pay taxes, you pay VAT on them.”
“So why does this government come and tell the consumer that because you are using the electricity for yourself, I should pay? What value is the consumer or the resident electricity user adding to the power that he is getting?” he stated.
On his part, former President John Mahama declared support for organized labour’s plea to cease the Value Added Tax (VAT) on electricity, expressing concern over its added burden on Ghanaians facing economic hardship.
He emphasized on Facebook that this move could escalate tariffs by nearly 21%, affecting prices of goods, services, and transport fares, urging the government to reverse its decision and provide relief.
Mahama criticized the Akufo-Addo-Bawumia government, asserting continued suffering under their leadership.
He stressed responsible utilization of the IMF’s recently released $600 million and urged caution by the outgoing government.
The NDC flag bearer pledged readiness to address Ghana’s economic challenges and provide relief upon assuming office in January 2025.
Highlighting his vision for creating well-paying jobs through the 24-hour economy policy, Mahama is set to embark on a three-day #BuildingGhanaTour in the Ashanti Region to engage with local concerns.
On Facebook, Mahama emphasized the need for relief from the IMF funds, agreeing with organized labour’s call to reverse VAT on electricity.
He urged the outgoing government to be cautious in utilizing funds from the IMF and other partners. Encouraging oversight, Mahama urged the NDC minority in parliament to monitor the government closely.
He committed to continuous public engagement about his vision for Ghana and strategies to create jobs during his Ashanti Region tour.
He wrote on Facebook “Under normal circumstances, the release of $600 million by the International Monetary Fund (IMF) to the government of Ghana should provide relief to the already overburdened and suffering Ghanaian.
“It is, however, evident that Ghanaians will continue to suffer as long as the Akufo-Addo-Bawumia and NPP remain in office.
“Implementing VAT on electricity consumption will increase tariffs by almost 21% and exacerbate the hardship on Ghanaians.
“This will affect the prices of goods, services, and transport fares.
“I agree with organised labour that the government must reverse its decision to start collecting VAT on electricity consumption.
“The National Democratic Congress (NDC) is eager and ready to address Ghana’s economic challenges and provide substantial relief to Ghanaians upon assumption of office in January 2025.
“Before that, I again urge the outgoing NPP government to be cautious, responsible and judicious in utilising the IMF $600 million and other funds that may be made available to Ghana from the World Bank and other development partners.
“I have already encouraged the NDC minority in parliament to ensure strict oversight on both the government and not to take their eyes off the Bank of Ghana that illegally printed billions of cedis and aggravated our economic situation.
“On my part, I will, from time to time, continue to engage the Ghanaian public about my vision to build the Ghana we want and how we will work together to create well-paying jobs through my 24-hour economy policy and other pragmatic initiatives.
“Over the next three days, I will be in the Ashanti Region to interact and listen on the eighth leg of my #BuildingGhanaTour.
