It’ll be an exercise in futility if tariff increase won’t resolve ECG’s debt accumulation – Kodzo Yaotse

The Policy Lead for Petroleum and Conventional Energy at the Africa Centre for Energy Policy (ACEP), Kodzo Yaotse, has joined calls for the Value Added Tax (VAT) on electricity to be scrapped.

The government in its instruction to the Ghana Revenue Authority (GRA) tasked it to collaborate with the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to implement VAT on households that exceed the lifeline power consumption.

Finance Minister, Ken Ofori-Atta’s directive, effective January 1, 2024, aims to transfer VAT generated from consumers surpassing the specified maximum consumption level for lifeline units.

Already, former President John Mahama, the Minority, and energy experts have opposed this move, which took effect on January 1, and are calling for a reversal of the VAT imposed on some categories of residential electricity consumers.

In an interview on Joy FM’s Top Story on Friday, January 12, Mr Kodzo Yaotse argued that “the tax measure would be detrimental to the economy.”

He explained that when tariffs are imposed, it could lead to two outcomes – illegal power consumption which would further compound the revenue liquidity.

He also indicated that “consumers that can pay for the power including small business will seek competitive alternatives outside the grid. With solar and other renewal energy becoming cheaper – this will be more favourable.”

He observed that this would also impact the Electricity Company Limited if consumers decide to disconnect from the grid.

“Any effort to increase tariff that is not complemented in resolving the debt accumulation at the distribution in which ECG is in charge of will be an exercise in futility,” he added.

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