IN response to mounting opposition from trade unions and business owners, the Ghanaian government has halted its proposal to impose a 15 percent tax on electricity. The decision came after widespread public outcry over the measure, which was intended to address economic challenges exacerbated by the Covid-19 pandemic.
At the beginning of the year, Ghana’s Ministry of Finance had announced plans to direct the Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCO) to levy the tax on domestic consumers. The government argued that the tax was necessary to generate additional revenue, citing a fiscal deficit of 11.8 percent in 2022 and a public debt exceeding 90 percent of GDP in the same year, as reported by the World Bank. By December 2022, Ghana had been compelled to suspend payments on a majority of its external debt.
However, the proposal faced fierce opposition amidst rising living costs and shrinking disposable incomes, with inflation soaring above 23 percent. Moreover, the timing of the electricity tax, which followed closely on the heels of another new levy requiring Ghanaians to pay an annual fee for the carbon emissions produced by their vehicles, only intensified public discontent.
The Trade Union Congress (TUC) of Ghana had slated a strike for the following week in protest against the government’s taxation policies. Joshua Ansah, TUC’s deputy general, criticised the government’s reliance on taxing citizens, stating, ‘The government has a lot of options, instead of taxing businesses and workers […] tax is the easiest and fastest way to get revenue, but it burdens your citizens.’
In an attempt to quell tensions and avoid industrial action, the government announced the suspension of the electricity tax implementation. The decision was made to facilitate further engagement with trade unions. However, the government has not completely abandoned the proposal.
The US Department of State has noted concerns from major international investors regarding Ghana’s increasingly aggressive tax collection policies. Local business owners fear that the escalating tax burden could jeopardise their competitiveness in the market.