The International Monetary Fund (IMF) has indicated that the government may consider reinstating the 15 percent value-added tax (VAT) on electricity if inflation rates continue to decline.The IMF's July 2024 Country Staff Report suggests that reintroducing the VAT is a potential course of action as inflationary pressures decrease.With recent data from the Ghana Statistical Service showing a drop in annual inflation to 20.9 percent in July, down from 22.8 percent in June, the government may reconsider the VAT policy.“On the revenue side, 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,” the IMF said on page 10 of the report.Originally, the government had postponed the VAT on electricity due to significant public opposition, particularly from residential users concerned about the added financial burden.This tax was initially part of broader revenue measures implemented as part of the IMF-supported recovery plan following the COVID-19 pandemic.

A directive from the Ministry of Finance, dated January 1, 2024, and signed by former minister Ken Ofori-Atta, instructed the Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCo) to impose the VAT on residential consumers who surpassed a specified consumption threshold.

“On behalf of the Government, Ministry of Finance would like to inform ECG and NEDCO to suspend the implementation of the VAT directive pending further engagement with key stakeholders, including Organised Labour.

“The Ministry expects that these engagements will birth innovative, robust, and inclusive approaches to bridging the existing fiscal gap, while bolstering economic resilience.”

However, on February 7, 2024, the government halted the VAT implementation following a threat of nationwide protests from Organised Labour, who had planned demonstrations for February 13, 2024, if the tax was not retracted.