Ghana suspends electricity tax plans after backlash

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The Ghanian authorities has suspended its plans to introduce a 15% tax on electrical energy after a fierce backlash from commerce unions and enterprise homeowners.

At the beginning of the 12 months, Ghana’s Ministry of Finance introduced that it will be directing the Electrical energy Firm of Ghana (ECG) and Northern Electrical energy Distribution Firm (NEDCO) to levy a 15% tax on home shoppers.

The federal government argued that this was a crucial measure to lift extra funds following a number of years of financial misery sparked by the Covid-19 pandemic. In response to the World Bank, Ghana’s fiscal deficit in 2022 was considerably above goal at 11.8%, whereas public debt surpassed 90% of GDP in the identical 12 months. By the tip of December 2022, Ghana was compelled to droop funds on most of its exterior debt.

Nonetheless, the plans prompted a public outcry amidst rising value of dwelling pressures and shrinking disposable incomes, with inflation at the moment running at over 23%. The proposed electrical energy levy was significantly unpopular given it got here shortly after one other new tax, which requires Ghanaians to pay an annual payment for the carbon emissions produced by their petrol or diesel automobiles, was applied earlier this week.

Ghana’s Commerce Union Congress (TUC) have deliberate a strike for subsequent week, with deputy common Joshua Ansah saying that “the federal government has numerous choices, as a substitute of taxing companies and employees […] tax is the simplest and quickest solution to get income, but it surely burdens your residents.”

The federal government has suspended the implementation of the electrical energy tax to conduct “additional engagement” with commerce unions, within the hope of avoiding industrial motion, however has but to drop the proposals fully.

The US Division of State has reported that “main worldwide buyers in Ghana have registered concern about more and more aggressive tax assortment insurance policies”. Native enterprise homeowners in Ghana have expressed considerations that the rising tax burden might injury their competitiveness.

Nadia Takyiwaa-Mensah, an Accra-based entrepreneur, tells African Enterprise that the tax is inflicting “deep discomfort” amongst enterprise leaders.

“In 2022, the Ghanian cedi took a deep dive and companies due to this fact took a significant hit as the worth of products went up, inflation reached its peak, and other people had been specializing in important bills. We felt the true results of this in 2023 – throughout this time we witnessed many companies shut for good because the pendulum had swung too far within the improper path and doing enterprise in Ghana was not making financial sense,” Takyiwaa-Mensah explains.

She fears that the federal government’s new tax proposals might dent into companies’ bottom-lines even additional and will immediate extra companies to shut fully.

“To face the extra burden of 15% VAT on pre-paid electrical energy causes me deep discomfort as a enterprise proprietor – there’s solely a lot, as a consumer-based enterprise, that we are able to cross on to our clients.”

“To take my restaurant companies for instance – our clients are already paying 22% tax on their foods and drinks. We are actually discovering that a few of our items are priced the identical as in New York or London, which is absurd,” Takyiwaa-Mensah provides. “We’re doubtlessly going to need to rethink our enterprise mannequin fully. For others, I anticipate extra enterprise closures.”

“It’s a step too far – enterprise homeowners and clients are being overly squeezed.”


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