Tax cuts will delay legacy debt repayment – James Avedzi

The Deputy Minority Leader in Parliament James Klutse Avedzie, has said that the decision by government to reduce aspects of the Energy Sector Levies will cause a further delay in the payment of the energy sector debt.

The National Electrification Scheme Levy (NESL) has been reduced from 5% to 2%, the Public Lighting Levy (PLL) reduces from 5% to 3% per kilowatt hour of electricity charged on all categories of consumers, following Parliament’s adoption of the amendment of the Energy Sector Levies law.

The reduction in the levies will cost government about GH¢308 million in revenue losses.

But the Chairman of the Finance Committee, Dr. Mark Assibey Yeboah, said the reductions will bring relief to electricity consumers.

“Government, as part of the 2017 budget statement and economic policy has proposed to reduce or abolish some taxes in order to bring relief to consumers. Pursuant to that commitment, government introduced this bill to amend the energy sector levies Act (2015, Act 899) as part of measures to reduce the energy sector levies imposed on consumers,” Dr. Assibey Yeboah said.

However, Avedzie argued that “The payment of the debt or recovery of debt will prolong. So, if it is supposed to take two years to pay back the legacy debt, because of the reduction in the levy, it will take a longer time to pay back.”

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“The owners of the debt have to bear with government, because of the policy government has taken, they are reducing the levy and so government will collect less and for that matter it will take long for government to pay back,” he added.

“If you can’t pay the debt within the shortest possible time and once you cannot recover the full cost of the product, the production of electricity, it will have negative effect on the economy and for that matter, it weakens the government’s strength to pay the debt. It’s the promise government gave to the people; let’s see how much be reduced in the electricity bill from next month. There may be a positive impact but very minimal,” he added.

Already, the government has settled GH¢588 million of the GH¢2.4 billion indebtedness of the Volta River Authority (VRA) to local banks and its suppliers.

This was after an initial deposit of GH¢250 million and two quarterly payments of GH¢169 million in the last quarter of 2016 and the first quarter of 2017.

The government, last year, reached an agreement with the local banks to restructure the legacy debts in the energy sector.