Private sector urges reduction of excise taxes

…to cushion effects of hike in fuel prices

Three of the top private sector representative organisations have called on government to intervene and adjust excise taxes to reduce the fuel price and negate the harmful impact on Guyana’s economy.

In a joint statement on Friday the Private Sector Commission, Georgetown Chambers and Commence Industry and the Guyana Manufacturing and Services Association observed that fuel prices have been constantly increasing over the past few weeks.

The organisation noted that in the past when there was a reduction in crude oil market price to US $44 per barrel in 2015, Government intervened to slash the retail price per litre from $219 to $153. However, although the world market price dipped below US $30 per barrel in 2016, the retail price per litre at the state owned pumps was $190 which was then reduced to $170 due to advocacy by the private sector for Government to intervene.

As the world market price for oil recovers, the local private sector has noted similar increases at retail outlets per litre of gasoline and diesel; from $180 in June, 2016 to $230 more recently in July, 2018. “While this is commensurate with the rising price of oil on the world market, there are ways in which our Government could stem the impact of the price increase on the local economy, in order to manage the foreseeable uptick in inflation and reduced economic activity. There is much that could be done by adjusting the excise tax so that businesses could remain competitive,” the organisation said in their statement.

“As consumers, there are economic implications of higher oil prices. When gasoline prices increase, a larger share of households’ income is likely to be spent on it, which leaves less to be spent on other goods and services. The same goes for businesses, whose goods must be shipped from place to place. The manufacturing sector that uses diesel and Bunker C for self-generation of power and steam are finding it difficult to cope with the increased cost as it has a negative impact on profits. The alternative is to increase prices of goods produced which is difficult to do in a competitive market.”

On the commercial side, the private sector fuel costs account for a significant part of overall operational costs in distribution and transportation businesses. “We therefore call upon our Government to intervene and adjust excise taxes to reduce the fuel price and negate the harmful impact on Guyana’s economy,” the statement ended.

Government studying options
Minister of Finance, Winston Jordan has said recently that Cabinet has discussed the increased fuel prices and is carefully considering options to avoid future negative effects on the country’s balance of payments. “The issue about price increases for the minibuses is also engaging the attention of the Cabinet. Only last Tuesday at Cabinet this matter was raised and so we will have to find creative solutions to the problem of rising fuel prices.

I understand though that in the past week or so, prices have trended downwards. I believe prices have fallen back to about 60-something dollars per barrel from the high 70-something,” Minister Jordan said.

In addition, he noted the opposition calls for a previously used tax formula to be employed to ease the burden of increased fuel prices on citizens. However, he said while the previous administration was able to forego taxes to maintain fuel prices in the past, the conditions were different.

“They say they had a formula in place where they used to reduce the excise tax so that people used to buy gas at the same price they used to buy before. I’m aware that indeed they had such a formula, but this is not only about whether government will still get the same amount of revenues that they had budgeted. It also has that external side… the side that has to do with finding the foreign currency to buy the same quantity of gas that you were consuming when the prices were low,” Minister Jordan said.

In a previous interview, with the Department of Public Information (DPI), Minister Jordan had said that the earlier arrangements were made possible because of favourable conditions of purchase obtained from Venezuela through the now-defunct PetroCaribe facility.

“How did the last government do it? Well in large measure because they had access to the PetroCaribe arrangement. That arrangement with Venezuela allowed the government to import expensive fuel from Venezuela, but only pay Venezuela a small part of what is owed to them and the rest rolled over into a long-term concessional financing.

So, at any one time, the last government didn’t have to face the proposition that we have right now, which is we have to find 100 percent of the cost of the fuel and pay for it immediately. When you have an arrangement such as the PetroCaribe it doesn’t affect your balance of payments significantly,” Jordan explained.

In September 2017, world market prices for fuel increased due in part to the hurricane conditions in the southern hemisphere, which resulted in GuyOil adjusting the prices in gasoline, diesel and kerosene to a higher cost. Again, in February of this year, the Guyana Oil Company (GuyOil) adjusted its prices upwards. GuyOil currently sells gasoline for approximately $220 per litre.

SHARE THIS ARTICLE :
Facebook
Twitter
WhatsApp

Leave a Comment

Your email address will not be published. Required fields are marked *

All our printed editions are available online
emblem3
Subscribe to the Guyana Chronicle.
Sign up to receive news and updates.
We respect your privacy.