Government is again exploring the possibility of capping the Value Added Tax (VAT) collected on fuel and the details of that will be outlined in next week’s Budget, Minister in the Ministry of Finance Ryan Straughn has revealed.
He said that a promised ease in taxes on freight is also on the cards but fears that with further increases expected to hit the global market, the savings for consumers may be limited.
Straughn, who is responsible for Finance and Economic Affairs in the Mia Mottley Cabinet, said the details would be revealed in the Budgetary Proposals and Financial Statements that are expected to be laid next Monday. It would be the first Budget address in two years since Mottley delivered her “stay the course” speech in March 2019.
“As we have indicated previously, we would review the VAT that is being applied to the entire system and determine at what level we would cap the VAT that we collect on that, and therefore, it is not the fuel tax but actually the taxation on fuel generally speaking, and you will hear something specifically on that on Monday,” Straughn told Barbados TODAY.
He also addressed an election promise made by Minister of Energy and Business Development Kerrie Symmonds to return freight costs to pre-COVID levels by “putting a freeze on [freight] prices” and removing VAT on some personal care products.
“Again, that is something that you will hear about on Monday in terms of the timelines for implementation. But the challenge has been and continues to be that…even though the Government can cap the amount of revenue that the Government gets from it, the actual cost having risen still has to be borne by the businesses,” Minister Straughn added.
On Monday, Barbadians were hit with price increases on all petroleum products which were partially blamed on tensions between Ukraine and Russia that have been mounting for months and escalated with the latter’s invasion of its Eastern European neighbour last week.
A decision by the United States and the United Kingdom to reject oil imports from Russia is expected to further destabilise global prices that already stand at US$130 per barrel.
Added to the implications of oil prices for all sectors are global shipping costs which have risen significantly throughout the pandemic.
Government’s 40 cents per litre levy at the pump as an alternative to road tax is again under scrutiny, especially from taxi drivers, who rely on gasoline to make a living and continue to pay a fixed annual road tax.
That appears to be non-negotiable if the Barbados National Oil Company and the National Petroleum Corporation – the nation’s monopoly fuel importers, are to make ends meet.
“The fuel tax is not collecting any more revenue than it would have [before oil price increases] given that it is fixed at 40 cents a litre,” said Straughn.
“What is driving the price up is not the fuel tax. What is driving the price up is the underlying movement in the oil prices and, therefore, that is what is out of our control in the context of what is happening in the global environment.
“If we were to reintroduce the road tax… yes, it would reduce the price but quite artificially, given that you would have to go into the Pine [Barbados Licensing Authority] and pay the road tax in the way that you used to before,” he added.
Straughn pledged Government’s best efforts to reduce the impact of the instability on consumers, in the tight fiscal space in which policy-makers currently have to manoeuvre. He added that the full reopening of the economy is part of the broader effort to help businesses recover losses incurred during the pandemic and slowly drive down the cost of living.