A Canada-based Barbadian economist is calling on Government to examine the tax structure applied to imported fuel, to get better control over future price fluctuations and give consumers an ease.
Although acknowledging that the current high prices for fuel in Barbados could not have been foreseen in the years prior to the COVID-19 pandemic, Carlos Forte contended that a review of the tax structure is warranted, given the public outcry over the 61 per cent increase on the import cost of fuel seen since January 2021.
“The Fuel Tax is made up also of 99 cent Excise Tax, plus the Value Added Tax (VAT), so there is a lot of room there for Government to adjust the taxation downward in circumstances where oil prices are going up,” he said during Tuesday’s Down to Brass Tacks programme, where Government’s Chief Economic Advisor, Ambassador Dr Clyde Mascoll, was a featured guest.
“I think it’s safe to say that when the tax was imposed and oil prices were a lot lower, that the Government perhaps did not model into the equation that oil prices would have been rising to the extent that they have, certainly over the course of the past year,” Forte added.
However, while agreeing that the cost of fuel could not have been predicted to rise as steeply as it did during the first half of 2021, Mascoll insisted that it was predominately the cost of imported fuel that was inflating the prices, and not taxes applied by the Government.
“Between January 3rd and June 6th of this year, the import price on gasoline went up by 61 per cent, and that in actual fact is about 58 cents over the last six months. Of that 58 cents, 48 cents was because of imported prices, not because of government policy. No rate in taxes were changed but because of how the VAT worked, that increased price also gave rise to an eight-cent rise in the VAT on fuel,” he explained.
The economic advisor said that any changes made to ease the burden on Barbadians might be a smart political move.
However, he noted, the same tax structure being criticized had resulted in significantly low fuel prices for most of 2020.
“Last year, the price of gasoline also fell significantly in Barbados, between June and the end of December. In fact, over the course of the entire year, gas prices fell by about 21 per cent but nobody would recognize that because it is suiting the consumer, as it should,” Mascoll highlighted.
“The fact of the matter is that since COVID, there has been some recovery internationally, gas prices have now gone back up 61 cents. The question is, ‘how do you respond to that?’”
(SB)
The post Economist: Fuel needs tax ease appeared first on Barbados Today.