By Kingsley Webora Tankeh
Electricity consumers are worried about a pending imposition of close to 22 per cent VAT on residential power consumers.
According to them, the new tax, coupled with the already high tariffs will further increase the burden on the taxpayers and force the public into engaging in illegal connections due to their inability to foot their electricity bills.
The government’s decision to impose VAT on non-lifeline residential electricity customers as part of the Covid-19 recovery program has triggered a conversation among the already tax-burdened public.
The new tax, they say, will compel people into illegalities against their own will due to their inability to pay for electricity.
Eric Frimpong Ngozi, a Station Master in Accra, is worried, the move will worsen his plight. “The taxes are too much. I can’t even understand. Is it only tax that can develop the country? We were told e-levy was going to salvage the economy. But later they said the e-levy wasn’t meeting the targets. Now they are imposing VAT on electricity. If they are not able to meet the targets, they will increase it again. Perhaps, they think this will help the country develop but it is costing us more,” Eric complained.
Electricity tariffs, according to the concerned public, are already high to start with so adding more taxes on electricity will overburden the public. “Ghanaians are already struggling to pay their electricity bills due to high tariffs. So, charging VAT on electricity consumption will be a burden for the ordinary Ghanaian to bear,” William who is an accountant in Accra told GBC.
He added that, the tax is in a way a laudable intervention considering the economic situation of the country. But it would be difficult for the ordinary Ghanaian to pay, at its current state.
He therefore urged the government to “review the rates, so that the ordinary Ghanaian: the people in the villages and the unemployed can also afford to pay their electricity bills.” He furthered that, the “imposition of VAT on electricity would mean there will be an increase in illegal connections.” “Covid-19 is over. So, the taxes that have been put on Covid-19 should be scrapped off by now,” he advised, adding that it will give the taxpayer some respite to be able to buckle up for the new tax. The Accountant also maintained that, “if the VAT on electricity will be used to develop the country: construct roads, hospitals and schools for the people to benefit. It is good. But if at the end of the day, the government cannot account for it, they should take a second look at it.”
Hajia Amina, a trader at Tudu in Accra also lamented that, the yet to be introduced tax will collapse her already struggling business. “Business is not good these days. How will we get money to pay these taxes,” Amina decried the effects of the dire economic conditions on her business?
Some also maintain that the government should do more to ensure a constant energy delivery rather than taxing an unreliable power supply. “Dumsor is back. What matters is for managers of the economy to address it and not to increase the taxes on electricity,” Emmanuel Adabah, from Ada, bemoans the current dynamics.
On January 12 2024, the Finance Minister, Ken Ofori Atta directed the Electricity Company of Ghana and the Northern Electricity Distribution Company (NEDCO) to impose VAT on residential electricity customers above the maximum consumption level specified for block charges for lifeline units. These two companies are expected to collaborate with the Ghana Revenue Authority to put measures in place to facilitate the collection. But the two companies are yet to calibrate their systems for this purpose. The imposition of VAT on residential consumers of electricity, which was supposed to take effect on January 1, 2024, according to the Finance Ministry, is in line with section 35, 37 and the first schedule (9) of the Value Added Tax Act (870), 2013.