Ex-chairman of the National Development Planning Commission (NDPC), Prof. Stephen Adei, has expressed disapproval of the Nana Addo Dankwa Akufo-Addo government's choice to implement VAT on a segment of electricity consumers in the country.

Prof. Stephen Adei argues that the imposition of VAT is counterproductive as it will inevitably impact households and businesses, subsequently affecting the government's revenue collection through taxes.

According to reports, he suggested that the government should explore innovative methods of taxing sectors in the country that are currently undertaxed or not taxed at all.

“There’s no doubt at all people will be worse off. You’ll first focus on things that increase production and then that in turn will feed into your taxes. You should be going after the billions of uncollected property taxes and people getting away [inaudible], being exempted, not even the more important ones.

“The mines have millions of exemptions and these are the ones we should go after rather than going after the ordinary producer and consumer when it comes to electricity,” Prof. Adei is quoted to have said.

A letter from the Ministry of Finance showed that the government has been changing Value Added Tax (VAT) on a section of electricity consumers in the country.

The letter, which was signed by the Minister for Finance, Ken Ofori-Atta, and addressed to the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), indicated that the VAT would be for residential customers of electricity above the maximum consumption level specified for block charges for lifeline units.

It said that VAT forms part of the implementation of the country’s Covid-29 recovery programme and should be charged starting from January 1, 2024.

“As part of the implementation of the Government's Medium-Term Revenue Strategy and the IMF-Supported Post Covid-19 Programme for Economic Growth (PC-PEG), the implementation of VAT for residential customers of electricity above the maximum consumption level specified for block charges for lifeline units in line with Section 35 and 37 and the First Schedule (9) of Value Added Tax (VAT) Act, 2013 (ACT 870) has been scheduled for implementation, effective 1st January 2024.”

For the avoidance of doubt, VAT is still exempt for "a supply to a dwelling of electricity up to a maximum consumption level specified for block charges for lifeline units" in line with Sections 35 and 37 and the First Schedule (9) of Act 870,” the letter further clarified.