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    VAT on electricity directive cannot be implemented because there are issues – ECG MD

    Amidst disagreements over the government’s decision to enforce a new Value Added Tax (VAT) on electricity consumers beyond the lifeline threshold, the Electricity Company of Ghana (ECG), tasked with implementation, has voiced reservations about the legal framework surrounding the tax.

    Although ECG and the Northern Electricity Distribution Company (NEDCO) had been instructed to initiate the tax from January 2024, ECG has indicated that it has not yet implemented it.

    During an appearance on Joy News’ PM Express on Wednesday, January 24, Samuel Dubik Masubir Mahama, the Managing Director of ECG, stated that the company cannot simply comply with the government’s directive, especially when there are issues with the provisions in the law passed as far back as 2013.

    Mahama explained that in January 2023, he sought the opinion of ECG lawyers regarding the provisions in the law due to identified problems. To substantiate his claim, he presented a document to the show’s host, Evans Mensah, dated January 10, 2023.

    “I asked for a legal opinion from the lawyers for ECG, to find out if within the law, this provision is right and in its implementation what it will mean. So let’s not take it for granted that even the company ECG or the government itself is not taking proactive measures to close this gap and find a way out of it.

    The Managing Director of ECG holds the perspective that the government’s letter instructing the implementation of the tax from January 2024 provides an opportunity for additional engagement with stakeholders regarding the policy.

    When the host reminded him that the letter from the government was a directive, he retorted, “It’s a directive, but if you are giving a directive and there are bottlenecks, you don’t go implementing a directive that has bottlenecks. Every directive allows for conversations to be had. ECG itself you have to come to ECG to ask ECG how you are going to implement this. There has to be stakeholder engagement, there has to be some form of sensitization so if you call this as a directive to me, I didn’t treat it as a directive” he emphasised.

    He mentioned that he has engaged in additional discussions with the Ministers of Energy and Finance to review the law and consider subsequent actions.

    “Conversations are far advanced. If this thing would have been charged this year, then by 1st January it would have been charged. Clearly, where we are now, we are finding whether even the law that was passed, what are the restrictions on the law…if it can be passed. We are finding a lot of interpretations.

    “If this law has to go back to parliament for it to be looked at and reconsidered then yes, so be it. It should be a national consensus, so we need to applaud the TUC [Trades Union Congress] for what they are doing and also be clear that, if the thing is not being implemented and the last paragraph said, transfer the revenues collected from the implementation of the VAT on the subject matter as a domestic VAT collection, there are processes that need to be outlined.”

    As per the Managing Director of ECG, implementing the VAT on pre-paid electricity consumers will pose a particular challenge.

    “It’s a technical difficulty; it’s a nightmare. How do you go about this?” he quizzed.

    “First of all, one of the biggest challenges that will come up is this; are we charging the VAT on residential customers? If yes, are they on pre-paid meters? Yes. So, are you charging per the money or the consumption? Because with pre-paid the consumption will be known at the end of the day, so I will only know your consumption after you have consumed. So, if I charge you the VAT when you are about to pay that will not be fair if I am charging on consumption.

    “If I am to implement it that means that at the end of the day, when you are about to purchase again you will actually have a debt that needs to be settled. There’s a lot of stakeholder engagement that has to go into something like this. So, I see more of this letter as a letter setting in motion an enquiry into all of this” he reiterated.


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