Indirect subsidies on electricity regressive – report
By Christabel Oboshie ANNAN & Zeenatu ABUBAKAR, Accra
Findings from a policy brief titled Fiscal Interventions and Welfare in Ghana: A Commitment to Equity (CEQ) have revealed that indirect subsidies on electricity are regressive in Ghana.
According to the findings, this is because many poor households in Ghana live in shared compound houses where access to electricity is based on shared metering.
The Research noted that although each household’s consumption may be within the lifeline band, the aggregated units of consumption recorded on the shared meter could be way above the lifeline band.
The situation according to the findings culminates in poor households paying more for electricity and losing out on critical government subsidies.
These findings were revealed at the launch of the policy brief and policy dialogue in Accra under the facilitation of Oxfam in Ghana.
Research Associate at the African Center of Excellence for Inequality Research (ACEIR), Dr. Kwadwo Danso-Mensah called for the revision of electricity tarrif structure based on comprehensive profiling of consumers.
He suggested that alternatively, a greater redistribution of welfare through electricity subsidy can be achieved by making electricity meters available to individual households who live in shared compound dwellings.
The Research Associate further advised government to increase the pace of rural electrification exercise to ensure greater access for poor households in rural communities.
Under different types of taxes under policy implication, Dr. Danso-Mensah disclosed that except for some excise taxes, direct taxes are more progressive than indirect taxes.
“This lends support to the need to expand the tax net for direct taxes by significantly reducing the large size of Ghana’s informal economy” he explained.
Under existing social policies such as LEAP and the school feeding, he suggested continuing to expand the reach of these social policies to serve more people.
The Research Associate further called on government to continue with subsidies or expenditure on basic education while ensuring high quality service provision at all levels.
Dr. Danso-Mensah suggested a widely expanded access to higher education and pointed out that, in addition to expanding basic education for all, it is critical to begin readjusting the way people think about higher education.
He stressed that expenditure on educational levels beyond basic education should be well targeted.
The policy dialogue is convened under a project supported by GIZ and implemented in conjunction with researchers of the Africa Centre of Excellence in Inequality Research (ACEIR) at the Institute of Statistical Social and Economic Research (ISSER) of the University of Ghana.
