The suspended 15 percent value-added tax (VAT) on electricity in Ghana might be reintroduced as the country experiences a steady decline in inflation rates.
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According to the Ghana Statistical Service (GSS), annual inflation dropped to 20.9 percent in July, the lowest in 28 months, marking a significant decrease from the 22.8 percent recorded in June 2024.
In its July 2024 Country Staff Report, the International Monetary Fund (IMF) highlighted that local officials are considering reinstating the VAT on electricity now that inflation is more controlled.
The IMF report noted, “Implementation of VAT on residential electricity (expected yield 0.17 percent of GDP) was suspended due to strong social resistance. The authorities are committed to implementing this measure when the inflation dynamics are more conducive.”
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The VAT on residential electricity was initially introduced as a revenue-generating measure during the COVID-19 recovery efforts, supported by the IMF.
However, after widespread public outcry and strong opposition led by organized labor, the government suspended the tax in February 2024 to engage further with stakeholders.
The suspension of the VAT on electricity created an estimated GH¢1.8 billion revenue shortfall. To address this gap, the government announced plans to tax the foreign incomes of resident Ghanaians and explore other alternative revenue measures.
Finance Minister Dr. Mohammed Amin Adam emphasized the importance of finding new revenue streams to maintain fiscal stability under Ghana’s IMF program.
“When we take a decision as a government that affects our fiscal framework, there are consequences,” Dr. Adam stated. “We must be proactive in filling the gap to avoid missing key fiscal targets.”
As inflation continues to ease, the reintroduction of VAT on electricity appears increasingly likely, with the government aiming to balance its fiscal responsibilities while managing public sentiment.
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