The Executive Director of the Institute for Energy Security (IES), Nana Amoasi VII, has raised concerns over the introduction of VAT on electricity tariffs.
According to IES, the situation will exacerbate the existing issue of power outages and will drive investors away from the sector.
The Ministry of Finance in a statement on December 12, 2023, announced that starting on January 1, 2024, the government would be enforcing a Value Added Tax (VAT) for residential electricity customers who exceed a specified maximum consumption level for lifeline units.
The Ministry in the statement explained that the decision aligns with the relevant sections of the Value Added Tax Act of 2013 and is part of the Government’s Medium-Term Revenue Strategy and the IMF-Supported Post-COVID-19 Programme for Economic Growth (PC-PEG).
“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 1 January 2024.”
However, Nana Amoasi VII, argued that the move will put more burden on electricity consumers.
“If any other sector player or investor is looking at this situation, they will advise themselves to the extent that they won’t invest in the sector because when you increase the tariff, you are increasing the burden of consumers. They may be compelled to either shy away from that power system or bypass that system by way of theft as well.”
He added, “When they bypass the system and probably resort to generated or probably renewable energy, then, of course, you are going to get excess capacity, which will come at the cost that I mentioned. You have to pay for the same. So what the government is doing is rather going to worsen the situation that we have today.”
