Too much tax on oil

Lambert Brown, Contributor

Jamaica does not produce oil, so we must import this essential product. The price of oil has risen sharply on the international market in recent times. Jamaica is faced with having to pay more for the oil we import. This higher price is passed on to our consumers. Also passed on to the consumers are increased taxes imposed on the price of oil by the Government.

In the last Budget year, the Government forecasted that it would raise $9.4 billion in taxes from what is called the 'ad valorem' tax. Under this taxation measure, every time the price of gas goes up, the Government gets more taxes. Estimates say that the Government now takes between $280 and $400 out of every $1,000 of gas purchased by the consumer. Given the current gas price, the Government is earning far more than it had originally expected. Taxes have pushed fuel prices to record-high prices. This is untenable. To make matters worse, the economy has suffered 14 consecutive quarters of no growth. Our people are hurting, and something must change quickly if the country is to survive.

Two years ago, speaking in the Budget Debate, Prime Minister Golding showed some understanding of the impact of oil on our economy. Then, he said: "One of the most binding constraints to achieving competitiveness is the high cost of energy. It bites a huge chunk out of the ability of local producers to compete either as exporters or domestic suppliers." Sadly, thereafter, his Government imposed the ad valorem tax on consumers. In so doing, it placed a new tax upon the existing tax. This is what is driving the very high price of fuel and pushing up the cost of living.

The Jamaica Gasolene Retailers' Association and others are calling for the rollback of these taxes. This is a 'noble' call, which all citizens should support. Given the history of the Jamaican people's reaction to fuel-price increases, it behoves the Government to heed the just call to roll back the taxes. Guyana has done so. The Obama government gave Americans a rebate in taxes, which they sent in purchasing gas. The tax rollback can and must be done in the interest of economic survival.

This gas-tax rollback would be consistent with positions held in the past by Mr Golding when he was opposition leader. Giving his first Budget speech as leader of the Opposition on April 21, 2005, he said, "But there is nothing noble about raising the gas tax at a time when oil prices are already raising the gas price and when the taxpayers have already been hit with a $9.3-billion tax package." That was six years ago. Back then, Mr Golding derisively declared in the same speech that "the price of gasolene, inclusive of government taxes, is now over $170 per gallon".

marching towards $600

Today, with fuel prices hovering around $120 per litre, costs are on a merry march towards $600 per gallon. A significant part of that elevated price are increased taxes imposed by Mr Golding's Government. We have seen increases of more than 300 per cent in gas prices in the last six years. No worker has got such a stratospheric salary increase in that period. No taxi driver, trucker or minibus operator has seen such increases in fares over the period. No businessman has seen such profit increase either. It is the Government which seems to be enjoying a windfall in taxes while the people suffer. This is not something the prime minister can be happy defending. Back in 2005, he opposed such windfall in government revenue. In his Budget speech, he said, "We are discomforted, however, by a feeling that the real purpose of the Joint Select Committee might be to secure some consensus on hiking the tax on gas ... really designed to reap a windfall in government revenue."

must respond to people

As we approach another Budget presentation, the call for a tax rollback, or the capping of the ad valorem tax on fuel will grow louder. The Government will be faced with either following the rigid strictures of the International Monetary Fund programme, or acting prudently in responding to the genuine call of the people. As the Government retreats on the Budget, it may do them well to recall that it was demonstrations against gas prices that became the undoing of Emperor Haile Selassie.

The Government must recognise the truth contained in recent comments by Senator Mark Golding on the gas-price situation. The senator was reported to have said: "Taxi operators, meanwhile, who have their rates fixed, have to absorb the escalating fuel costs. The cost of doing business in Jamaica is damaging the competitiveness of our economy, and is driving many businesses to the wall. In most cases, the increases can no longer be passed on to long-suffering consumers, who lack the capacity to bear any more."

Jamaica is at a critical juncture. Poverty has doubled in the last three years. Our national debt has escalated from $980 billion to more than $1.5 trillion, an increase of more than $600 billion since 2007. Unemployment and business failures have increased considerably. Good news is rare, and arrogance and mendacity have replaced good governance. This is a toxic cocktail that suggests serious trouble ahead. It is in this context that the rolling back of the tax on fuel becomes imperative.

Failure on the part of the Government to act with wisdom could be explosive. The people are saying, enough is enough. The agitation of workers is increasing and the comfort level of the Government is receding. Trust in the Government has dissipated. The recent Manatt-Dudus enquiry, so widely and attentively watched by the people here and abroad, has eroded any semblance of confidence that was left in the Government. The damage done by phrases such as "I can't recall" and "pathologically mendacious" to the Government are real, irreparable, and may even be incurable by a general election. Not even a favourable report absolving the Government of corruption or involvement in a "web of deception" by the Manatt-Dudus commissioners will be enough to eradicate the stench of the rot that has engulfed our country in the last two years.

The gas tax may be just the straw that breaks the camel's back, or dislodges the spider's web.

Lambert Brown is president of the University and Allied Workers' Union. Email feedback to columns@gleanerjm.com and labpoyh@yahoo.com.