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ONLY HUMAN: Cut tax to ease gas price

Sanka Price

ONLY HUMAN: Cut tax to  ease gas price

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BARBADIAN MOTORISTS are today paying 81 cents per litre more for gasoline than they were in March 2008. Those who use diesel are paying $1.16 per litre more, while householders who use kerosene have seen a hike of 37 cents per litre over the three-year period.
Put another way, the average family car with a 50 litre tank would, theoretically, cost a maximum of $107.50 to fill it in 2008. Today, to fill the same tank would cost $148 – an increase of $40.50.
For those who operate diesel powered flat-bed trucks, which tend to be used for product deliveries here, their tank usually holds 100 litres. In March 2008 that trucker could fill up for $146. Today it would cost them $174.
Between May 2008 and last Sunday, the price of gasoline increased no less than 12 times (based on our archives), and diesel and kerosene 11 times. Over the same period there were seven reductions in the prices.  
These fluctuations in prices are due to government’s action on June 5, 2008, to institute a mechanism to adjust petroleum prices on a monthly basis in keeping with international trends as it related to the pricing of petroleum products.
With the ongoing crisis in Libya and hints of similar unrest in the Gulf states and Saudi Arabia, further hikes in petroleum prices in the coming weeks seem inevitable.
What I’m sure most Barbadians would like to know is how these expected increases can be minimized to ease our pockets, given that more hikes are coming for commodities too, such as flour, while wages are unlikely to rise to keep pace?
There is a way. It can be achieved if Government restructures the mechanism for the calculation of the 50 per cent excise tax on gasoline to reduce the burden on the public, while allowing the achievement of its revenue target.
You may recall that in the November 2010 Budget, Minister of Finance Chris Sinckler in announcing the increase in the excise tax said it would take “effect from December 1, 2010, as a revenue-raising measure. The new excise tax on gasoline will be $0.5358 per litre. This measure is expected to raise an additional $22.7million in a fiscal year”.
At the time of Sinckler’s announcement gasoline was $2.44 per litre. That would suggest the additional $22.7 million he expected to earn would come from the excise tax based on that figure.
However, when the tax came into effect on December 1, the price of gasoline rose that same day to $2.76 per litre. Since then the price per litre has increased by 20 cents to $2.96 – some 52 cents higher than when Sinckler first announced the measure.
With each increase in the price of gas above $2.44 per litre, Government is pulling in more VAT revenue than they budgeted for. I leave it to the accountants and finance gurus to work out the surplus Government is raking in, but common sense tells me that if your projected earnings are on a percentage of a particular base price, when that base price goes up, your percentage take also rises so you get more than you bargained for. Government should therefore put a mechanism in place to effect a reduction in the excise tax to offset the increase in VAT which they did not budget for. This would immediately lower the cost of gasoline to the consumer as the tax on it would be reduced, even though the price of the gasoline itself would have increased.
Though Government is cash-strapped and is trying to raise revenue to narrow the fiscal gap on current account, which now stands at more than half a billion dollars, it needs to shield the public from high prices whenever they can.  
As I see it, a move to regulate the excise tax would be a step in this direction without hurting the Government’s projected revenue earnings.
It would certainly help to counter the Opposition’s argument that Government is “tax gouging”, especially coming after the reclassification exercise going on at Customs, which has seen the prices of some food items increased.