Monday, March 4, 2024
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HomeBusinessFrom free electricity to taxing times

From free electricity to taxing times

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There is no free lunch indeed!

In the unprecedented times of the COVID-19 pandemic, the Government of Ghana took a bold step to provide relief to its citizens.

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Between April and September 2020, over GH¢1 billion was spent to grant free electricity to lifeline consumers and absorb a substantial 50% of all electricity bills for residential and commercial customers.

Accra, Ghana

However, the adage “there is no free lunch” proved true as subsequent fiscal measures aimed at recouping losses and sustaining economic recovery brought about a significant shift.

2021: A taxing twist in the tale

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In 2021, the government responded to the ongoing challenges posed by the pandemic by introducing the COVID-19 Health Levy on the supply and importation of goods and services with some exemptions.

This move had a ripple effect, leading to an increase in Value Added Tax (VAT) and the National Health Insurance Levy (NHIL). The fiscal landscape was evolving, setting the stage for a delicate dance between relief and revenue generation.

2022: Lifeline consumer bracket truncated – eye clear?

To bolster revenue and address the mounting costs of power generation, the government decided, in 2022, to truncate the lifeline consumer bracket for electricity. From 0-50 kWh, it was reduced to 0-30 kWh. This shift, while driven by economic necessity, left many consumers priced out after having enjoyed free electricity during the pandemic.

Accra, Ghana

The government’s balancing act between fiscal responsibility and providing affordable services faced its first major challenge.

2023: Adapting to economic realities with quarterly tariff adjustments

In 2023, recognizing the need for a more adaptive approach, the government introduced a quarterly utility tariff adjustment system.

This innovative system aimed to navigate the complex economic realities, providing a more responsive mechanism for regulating utility tariffs. It signaled a commitment to finding sustainable solutions amidst an ever-changing landscape.

2024: VAT imposed on high consumption – the final chapter in the recovery exercise?

As part of the government’s comprehensive COVID-19 recovery program, a new fiscal measure was implemented on January 1, 2024. VAT was charged on residential electricity customers consuming more than 50 kWh.

This marked a culmination of efforts to recover losses and generate revenue post-pandemic.

The government, having initially provided relief, now faced the challenging task of striking a balance between economic recovery and the financial burdens placed on its citizens.

Many consumers were priced out after enjoying power for free during the heat of the pandemic and households who enjoyed a 50% discount on their bills their the pandemic have been paying more after the free lunch and they will definitely pay more as a result of this tax move.

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