15% VAT on electricity to offset energy sector debts – Agyapa Mercer

The government has justified the 15% Value Added Tax(VAT) it is imposing on electricity consumption.

It says the measure is part of the government’s COVID-19 recovery program, aiming to generate additional revenue.

Deputy Energy Minister Agyapa Mercer speaking in an interview on Monday, January 15, emphasized that it was a challenging decision.

However, he said, it is necessary to settle debts owed to independent power producers.

“If you look at the scope of the tax and what it is intended to do—raise revenue to meet some obligations of the government in the energy sector—it will interest you to know that, as we speak, as of July 2023, the amount of money that we owe to the IPPs alone is in the region of GH¢1.7 billion.

There are growing calls from the Minority and energy experts for the reversal of the Value Added Tax imposed on some categories of residential electricity consumers.

In a letter communicating the Finance Ministry’s policy to the Public Utility Regulatory Commission, PURC, Finance Minister Ken Ofori Atta states that any electricity consumption above lifeline units will attract the value-added levy.

The Director of Business Operations at Dalex Finance, Joe Jackson, criticized the government’s decision to impose the VAT on consumers, describing it as harsh.

Kofi Kapito, the Chief Executive Officer (CEO) of the Consumer Protection Agency, also described it as ridiculous.