In the aftermath of disagreements surrounding the government’s decision to impose a new Value Added Tax (VAT) on electricity consumers beyond the lifeline threshold, the Electricity Company of Ghana (ECG), the implementing agency, has expressed reservations about the legislation enforcing the tax.
Despite being directed to implement the tax from January 2024, both ECG and the Northern Electricity Distribution Company (NEDCO) have yet to enforce it.
Speaking on Joy News, the Managing Director of ECG, Samuel Dubik Masubir Mahama, revealed that ECG has not implemented the tax due to concerns about the legal provision dating back to 2013.
Mahama sought a legal opinion from ECG’s lawyers in January 2023, highlighting issues with the provision in the law. He emphasized that proactive measures are being taken to address the gaps and find a resolution.
The ECG MD views the government’s directive to implement the tax as an opportunity for further stakeholder engagement on the policy. Despite acknowledging it as a directive, Mahama emphasized the need for conversations and stakeholder engagement, particularly when faced with bottlenecks.
“I asked for a legal opinion from the lawyers for ECG, to find out if within the law, this provision is right and in its implementation what it will mean. So let’s not take it for granted that even the company ECG or the government itself is not taking proactive measures to close this gap and find a way out of it.
He mentioned ongoing discussions with the Energy and Finance Ministers to review the law and determine the necessary actions. Mahama expressed support for the Trades Union Congress (TUC) and suggested that if the law needs reconsideration, it should be a national consensus.
“Conversations are far advanced. If this thing would have been charged this year, then by 1st January it would have been charged. Clearly, where we are now, we are finding whether even the law that was passed, what are the restrictions on the law…if it can be passed. We are finding a lot of interpretations.
“If this law has to go back to parliament for it to be looked at and reconsidered then yes, so be it. It should be a national consensus, so we need to applaud the TUC [Trades Union Congress] for what they are doing and also be clear that, if the thing is not being implemented and the last paragraph said, transfer the revenues collected from the implementation of the VAT on the subject matter as a domestic VAT collection, there are processes that need to be outlined.”
“It’s a technical difficulty; it’s a nightmare. How do you go about this?” he quizzed.
“First of all, one of the biggest challenges that will come up is this; are we charging the VAT on residential customers? If yes, are they on pre-paid meters? Yes. So, are you charging per the money or the consumption? Because with pre-paid the consumption will be known at the end of the day, so I will only know your consumption after you have consumed. So, if I charge you the VAT when you are about to pay that will not be fair if I am charging on consumption.
Mahama highlighted potential challenges in implementing the VAT on pre-paid electricity consumers, citing technical difficulties and the need for thorough stakeholder engagement to ensure fairness.
Various groups and individuals, including the TUC, have condemned the VAT on electricity, giving the government a seven-day ultimatum to withdraw the tax. Finance Minister Ken Ofori-Atta instructed ECG and NEDCO to implement the VAT as part of the government’s COVID-19 recovery program.
The government justifies the 15 percent VAT on electricity consumption as a measure to generate additional revenue for the COVID-19 recovery program.
Deputy Energy Minister Agyapa Mercer emphasized the necessity of the tax to settle debts owed to independent power producers, amounting to GH¢1.7 billion as of July 2023.
VAT on power consumption: We can’t implement a directive that has bottlenecks – ECG MD #JoySMS https://t.co/hzE120YjJF
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