Ghana Halts New Electricity Tax Amid Public Outcry

Ghana’s government has decided to postpone the implementation of a new 15% tax on electricity, following public outcry over concerns that it would worsen the already severe cost-of-living crisis. The proposed value-added tax (VAT) was intended to apply to domestic electricity consumers, with the aim of boosting government revenue under pressure from the International Monetary Fund (IMF). However, labor unions vehemently opposed the tax, announcing plans for nationwide protests against it. Consequently, authorities have suspended the tax until discussions can be held to address the dispute. This decision comes shortly after the government initiated a fuel emissions levy, which elicited mixed reactions from the public. Ghanaians are now required to pay an annual levy for the carbon emissions generated by their petrol- or diesel-powered vehicles. Critics fear that these additional taxes could exacerbate the struggling economy’s challenges, particularly the rising prices of essentials like fuel. The Finance Ministry has instructed the main power distributors, Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), to halt the implementation of the new levy. This pause is intended to facilitate extensive dialogue and garner support from industry players and labor unions, given the significant concerns raised about its impact on consumers and businesses. However, despite this decision, the Trades Union Congress (TUC) has indicated that plans for protests scheduled to begin next Wednesday remain unchanged, as the government has yet to formally communicate its decision. Trade unions argue that introducing additional taxes will further burden families and companies, exacerbating the already high cost of doing business. The TUC has demanded the immediate withdrawal of the electricity tax. Ghana is currently grappling with its most severe economic crisis in a generation, leading the government to enter a $3 billion (£2.4 billion) bailout program with the IMF last year. This bailout was contingent on the government taking measures to increase revenue. The energy sector in Ghana is under significant financial strain, with private electricity suppliers owed $1.6 billion by the government. Ghana has faced power shortages, colloquially known as “dumsor” in the Akan language, for several years. Despite its reliance on hydro and thermal energy sources, poor maintenance often disrupts supply. The country has increasingly turned to gas for electricity generation, but shortages in gas supply frequently result in power cuts.