Shield for motorists, shippers

Barbadians will be paying less tax at the pumps come Wednesday.

In a measure intended to “shield” consumers from the increasing oil prices, Government announced on Monday that it will give up just over $25 million as a cap is imposed on the 17.5 per cent Value Added Tax (VAT) on petrol and diesel that motorists will pay at least for the next six months.

Prime Minister Mia Mottley, in making her Budget presentation on Monday, also announced a cap on the cost of freight for the next 12 months.
Mottley announced that as of midnight Wednesday, March 16, the VAT on petrol will be capped at 47 cents per litre and the VAT on diesel at 37 cents per litre, initially for six months.

Consumers currently pay 61 cents in VAT per litre for petrol and 51 cents per litre for diesel.

“I give the House the assurance that at the end of the six months we may well have to look and see what further adjustments have to be made, but in this environment we have to walk sure-footed. This means once adjusted from midnight, Wednesday March 16, Barbadians therefore will see the price of oil at the pump go from $4.13 to $3.99 immediately,” Mottley announced.

“Similarly, in the case of diesel . . . this means that the current international prices should bring down the price of a litre of diesel from $3.46 to $3.32,” she said.

“The Government is effectively transferring these 14 cents per litre of gas in VAT revenue and 14 cents per litre of diesel in VAT revenue to the consumers, delivering a collective savings to consumers, but at the same time costing the Government of Barbados $25.2 million in lost revenue,” said Mottley.

Conceding that it was a sacrifice that Government had to make, the Prime Minister said should the Russia-Ukraine war “last longer” or become more disruptive resulting in higher oil prices then the “transfer of VAT foregone by the Government for the benefit of consumers will equally grow”.

She acknowledged that Government needed all the tax revenue it could collect, but said adjustments needed to be made to the tax on gas and freight since those taxes were linked to the cost of the product.

“We do not need to collect even more revenue from the consumption of oil and freight and therefore the adjustments must come here,” said Mottley.

Stating that government was unable to “go back to the old days of subsidizing oil because it will break us”, Mottley said, “What we can do is control the amount of taxes that we take from the oil which is purchased.”

She said while there were some who would argue that Government should have adjusted the excise tax, this could not be done since it would have a deleterious impact on Government’s revenue.

Pointing to the cost of imports, Mottley said it was also necessary for Government to put a cap on freight costs to help shield consumers from the rising costs associated with shipping.

She announced that effective midnight Monday, March 14, 2022, the cost of freight would be capped at $7,350 per 20-foot container and $8,000 for 40 foot containers, which represented the average costs of freight in 2019.

“We shall hold these costs for 12 months. This means the Government will forego revenue with respect to the escalation of shipping prices for the next 12 months, until March 31, 2023.

It is difficult for us to calculate what the amount will be largely because of the fluidity of imports into the country,” said Mottley.

She noted that during 2021, at the height of the pandemic and global disruption of trade, the average price of freight had jumped to US$20,000 per 20-foot container and $24,650 per 40-foot container.

“These two measures will bring partial but, we believe, significant relief to all Barbadian consumers. This is part of the Barbadian shield,” she said. (MM)