Cabinet has decided to withdraw the controversial 15% VAT on electricity subject to further engagement with the IMF, TV3 Sources can confirm.
TV3’s sources are very close to Cabinet.
The proposal has proved very unpopular with Organised Labour, civil society and sections of the Ghanaian society.
Organised Labour has threatened a nationwide industrial action if the tax is not withdrawn.
Government justified the imposition of the tax as a measure to raise revenue to clear the energy sector debt in a bid to boost the viability of the sector.
However, TV3 understands government may have been forced to backtrack due to the mounting pressure from Labour and other stakeholders. A demonstration has been planned the Trade Union Congress on February 13 against the measure.
And there has been bi-partisan calls for the tax to be dropped. National Democratic Congress candidate John Mahama said it would add to what he said is the hardships of Ghanaians.
National Organizer of the New Patriotic Party (NPP), Henry Nana Boakye is reported to have said that the tax needs to be dropped, because it was among other things making the government unpopular in an election year. He added this was a position of the party.
Government now has to engage the IMF, in areas of expenditure to be restructured within the existing budget to ensure that scrapping the tax will not result in a huge revenue shortfall that will throw the budget off balance.