The International Monetary Fund’s resident representative in Ghana, Dr. Leandro Medina, has stressed the importance of protecting vulnerable individuals during challenging reforms and actions, such as the introduction of a 21% Value Added Tax on specific electricity consumers as part of Ghana’s COVID-19 recovery programme.
A letter addressed to the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO), and signed by the Minister for Finance, Ken Ofori-Atta stated that the VAT will apply to residential electricity customers above the maximum consumption level specified for block charges for lifeline units.
This move is part of the government’s Covid-19 recovery programme and took effect from January 1, 2024.
According to the Finance Ministry, the implementation of VAT for residential customers of electricity is in line with Sections 35 and 37 and the First Schedule (9) of the Value Added Tax (VAT) Act, 2013 (ACT 870).
However, Mr. Medina, speaking on the Citi Breakfast Show with Bernard Avle on Tuesday, January 30, 2024, explained that it is important as a country to consider the vulnerable when it comes to programmes like this.
He added that these measures disproportionately affect vulnerable people, and the authorities are developing a social protection programme to address this issue.
“In the context of these types of programmes where you come from a very difficult situation with very high inflation that will affect the poor essentially 100% and difficult reforms and actions, it is very important to protect the vulnerable. They are the most affected by this situation and the authorities have been making some efforts to expand the most effective social protection programme in the context of the programme and also make sure under the programme under the social spending flow.”
He also revealed that the programme, in support of the World Bank, is important to prevent poverty and inequality.
Mr. Medina noted that as part of the programme, the allocation has already been made to some sectors including the Education and health sectors.
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