Ghana suspends 15% VAT on electricity

Ghana's Ministry of Finance has made a significant decision to suspend the planned implementation of a 15 percent Value Added Tax (VAT) on domestic consumption of electricity. This move comes amidst concerns raised by various stakeholders, including organised labor and industry players, about the potential negative impact of the tax on households and businesses in the country. Kweku Arkoh-Koomson, an Economic Analyst at Databank, shared insights on this development and shed light on its implications for the Ghanaian economy. The decision to scrap the 15 percent VAT on electricity consumption above lifeline levels for most retail household consumers has been met with a positive response from the business community. This move is seen as a step in the right direction, as it addresses the high cost of operations and production in the country. By avoiding an increase in taxes on electricity consumption, the government aims to prevent additional cost burdens that could lead to inflationary pressures. Kweku Arkoh-Koomson emphasized the importance of engaging with industry players in broader consultations to determine a more sustainable tax measure. He highlighted the need for effective stakeholder engagement to address concerns around the multiplicity of taxes and their impact on inflation. By exploring alternative tax measures that promote welfare benefits and improve the standard of living for consumers and businesses, Ghana can create a more conducive business environment. Moving forward, discussions with electricity providers such as the Electricity Company of Ghana and NEDCO will play a crucial role in shaping the outcome of these tax reforms. In addition to the VAT suspension, Ghana is facing challenges in the cocoa market due to supply constraints. The country has lost over 500,000 hectares of cocoa farms to swollen shoot disease, posing a significant threat to the cocoa industry. Although the Ghana Cocoa Board had planned to introduce disease-resistant variants to combat this issue, the intervention has faced delays in implementation. Illegal mining activities have also contributed to the losses in cocoa production. As a result of these challenges, cocoa prices have surged on the global market, with New York cocoa prices rising by 3.6 percent this week, surpassing $5,000 per metric tonne. Despite the increase in prices, Ghana must address the supply constraints in the cocoa sector to safeguard its position as a leading cocoa producer. The government and industry stakeholders must work together to implement effective solutions that protect Ghana's cocoa farms and support sustainable growth in the sector.