The Ministry of Finance has directed the Electricity of Ghana and the Northern Electricity Distribution (NEDCO) to suspend the implementation of the Value Added Tax (VAT) directive until further engagements with key stakeholders, including organized labour, are completed. This decision aims to foster innovative and inclusive approaches to address the existing fiscal gap while strengthening economic resilience.
In a statement, the Ministry of Finance referred to its previous letter dated December 12, 2023, and press statement issued on January 30, 2024, regarding the VAT directive. On behalf of the government, the Ministry informed the Electricity Company of Ghana, Ltd. (ECG) and NEDCO to halt the implementation of the VAT directive while further discussions take place with key stakeholders, including organized labour.
The Ministry expects these engagements to lead to the development of innovative and robust strategies that bridge the fiscal gap while enhancing economic resilience. Organized labour has previously insisted on the complete withdrawal of the 15% VAT on electricity and threatened to stage a demonstration if the government does not comply with their demand.
Concerns have also been raised about the potential impact of the VAT implementation on inflation, which could hinder the government’s macroeconomic targets outlined in the International Monetary Fund-supported programme.
The Ministry of Finance’s decision to suspend the VAT directive on electricity reflects a commitment to engaging with stakeholders and finding comprehensive solutions that address fiscal challenges while ensuring economic stability.
