The Managing Director of the Electricity Company of Ghana (ECG), Samuel Dubik Mahama says the law regarding the implementation of a 15% Value Added Tax (VAT) on lifeline consumption is vague.

In a press release on December 12, 2023, the Finance Minister directed that ECG and the Northern Electricity Distribution Company (NEDCO) work with GRA to implement VAT on households that have consumed power above the maximum consumption level specified for block charges for lifeline units.

The ministry backed its directive with the VAT Act, 2013, Sections 35 and 37, and the First Schedule (9) of Act 870.

But Mr Mahama insists that the framers of the constitution did not explicitly state the objectives the law was trying to achieve, making it difficult for ECG to carry out implementation.

Speaking on JoyNews’ Newsfile on January 27, he explained that about 50 % of Ghanaians use pre-paid meters, implying that ECG can not determine if they exceed the lifeline threshold of 30 kilowatts since they [consumer] purchased power before consumption.

“We need to take steps to know why that law was passed in 2013 and what the framers of that section, what their thinking was. 

“Interpretation-wise, what mischief were they trying to achieve? It is too vague,” he said.

Mr Mahama added that if the law could be circumvented individuals could calculate how much 30 kilowatt hours cost and buy the exact amount in their prepaid.

• Read also: Government charging VAT on electricity from January 1

Again the Managing Director said if his outfit did not understand the rationale for the implementation, they might charge prepaid consumers based on price instead of consumption.

“If you are buying GH₵ 200, am I to charge the VAT on the GH₵200 and add it to the GH₵200 for you to pay that deposit? That means I am charging on price, I am not charging on consumption.

• Read also: VAT on non-lifeline residential consumption not implemented – ECG

“Let's say the whole country was postpaid metered yes, you could try something like that because everybody consumes with that one, you consume, we read the meter then you [pay].

"But that is not the case. If you do this a certain group are going to be burdened others are not,” he said.

He stressed that if the ECG were to implement the directive from the Finance Ministry, a certain group would be overburdened while others would not pay the tax. 

Meanwhile, he said there is a need for broad stakeholder consultation to discuss how the law is going to be implemented.