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Will try to convince Jamaicans that money raised will be used to repair roads
Monday, April 20, 2009
THE Government is seriously considering a cess on gasoline in an effort to close the budget gap, a highly placed source in the ruling Jamaica Labour Party confirmed to the Observer at the weekend.
But the administration, fearful that any such cess will ignite public protest, is apparently preparing a strategy to try to convince Jamaicans that money raised from the tax will be used to repair roads and other vital infrastructure.
"The time has come to seriously consider placing a cess on gas which would be retained locally and dedicated to the repair of our road and transportation infrastructure," said the source, who spoke on condition of anonymity. "In the short-term, this would reduce the cost of transportation in terms of wear and tear on vehicles and increase the efficiency of the transportation system in terms of access and shorter commuting times to the benefit of all Jamaicans."
Other Government sources have suggested that a one dollar per litre increase in the tax on gas would generate tax revenue roughly equal to $1 billion, so that the price of gas would have to be raised by between $15 and $20 per litre to close the budget gap said to be between $15 billion and $20 billion.
At minimum, a double-digit increase in the tax on gas would therefore appear likely, one financial analyst argued.
"A gas tax is one of the most equitable taxes in Jamaica, as the driver of a gas guzzling vehicle would pay far more in tax than a commuter taking public transport," the Government source said in an obvious effort to justify the planned cess.
Jamaicans staged angry street protests in April 1999 against the imposition of a gas tax by the then Government, shutting down the country for four days.
The JLP, which was then in Opposition, piggy-backed on what really began as a popular protest and politicised the riots which resulted in the Government reversing the decision.
Since then, the Government has avoided imposing a gas tax and the apprehension over the measure within the current administration was obvious in the tone of the source as he spoke at the weekend.
"The only way Jamaicans should be willing to make the sacrifice to bear higher gas prices is with the understanding that there is a benefit in it for them," he said. "If the Government commits to using much of the funds to finance road infrastructure, when the motorist goes to the pump he knows he doesn't have to visit the mechanic and the autoparts store as often as before, and will spend less time negotiating bad roads. The interior roads, particularly for rural districts and communities, have long been neglected, and the only way for the Government to find the funds to finance the needed infrastructure, roads and bridges, is through a cess on gas. The revenue generated will also help to bolster the Government's fiscal position in this most severe world economic crisis. It's a win win for Jamaica."
Revenue from the cess, he added, will help the country send a good signal to its creditors "that we will achieve a reasonable deficit outturn and it will also act as a form of stimulus by allowing the financing of infrastructure, which is what is needed in a time of recession".
Added the source: "We are confident that the Jamaican people will see past political manoeuvrings and focus on their best interest, which undoubtedly lies in better infrastructure among other things."
Last week, Minister Don Wehby reaffirmed that the final report of the Tax Policy Review Committee commissioned by former Finance Minister Dr Omar Davies, more widely known as the Matalon Report, remains a central plank of the Government's tax reform programme.
The report recommends that "the Government consider imposing a standard rate of GCT on the SCT-inclusive motor fuels base".
This means putting General Consumption Tax (GCT) on the full price of gas, including the Special Consumption Tax (SCT) already charged.
According to a leading retailer, the weighted average price of the three main motor fuel types - E10, 90 and diesel - is approximately $60 per litre.
According to the Matalon Report, a tax on gas "has the advantage of yielding significant revenue in the very short run".
http://www.jamaicaobserver.com/news/...S_GAS_TAX_.asp
Monday, April 20, 2009
THE Government is seriously considering a cess on gasoline in an effort to close the budget gap, a highly placed source in the ruling Jamaica Labour Party confirmed to the Observer at the weekend.
But the administration, fearful that any such cess will ignite public protest, is apparently preparing a strategy to try to convince Jamaicans that money raised from the tax will be used to repair roads and other vital infrastructure.
"The time has come to seriously consider placing a cess on gas which would be retained locally and dedicated to the repair of our road and transportation infrastructure," said the source, who spoke on condition of anonymity. "In the short-term, this would reduce the cost of transportation in terms of wear and tear on vehicles and increase the efficiency of the transportation system in terms of access and shorter commuting times to the benefit of all Jamaicans."
Other Government sources have suggested that a one dollar per litre increase in the tax on gas would generate tax revenue roughly equal to $1 billion, so that the price of gas would have to be raised by between $15 and $20 per litre to close the budget gap said to be between $15 billion and $20 billion.
At minimum, a double-digit increase in the tax on gas would therefore appear likely, one financial analyst argued.
"A gas tax is one of the most equitable taxes in Jamaica, as the driver of a gas guzzling vehicle would pay far more in tax than a commuter taking public transport," the Government source said in an obvious effort to justify the planned cess.
Jamaicans staged angry street protests in April 1999 against the imposition of a gas tax by the then Government, shutting down the country for four days.
The JLP, which was then in Opposition, piggy-backed on what really began as a popular protest and politicised the riots which resulted in the Government reversing the decision.
Since then, the Government has avoided imposing a gas tax and the apprehension over the measure within the current administration was obvious in the tone of the source as he spoke at the weekend.
"The only way Jamaicans should be willing to make the sacrifice to bear higher gas prices is with the understanding that there is a benefit in it for them," he said. "If the Government commits to using much of the funds to finance road infrastructure, when the motorist goes to the pump he knows he doesn't have to visit the mechanic and the autoparts store as often as before, and will spend less time negotiating bad roads. The interior roads, particularly for rural districts and communities, have long been neglected, and the only way for the Government to find the funds to finance the needed infrastructure, roads and bridges, is through a cess on gas. The revenue generated will also help to bolster the Government's fiscal position in this most severe world economic crisis. It's a win win for Jamaica."
Revenue from the cess, he added, will help the country send a good signal to its creditors "that we will achieve a reasonable deficit outturn and it will also act as a form of stimulus by allowing the financing of infrastructure, which is what is needed in a time of recession".
Added the source: "We are confident that the Jamaican people will see past political manoeuvrings and focus on their best interest, which undoubtedly lies in better infrastructure among other things."
Last week, Minister Don Wehby reaffirmed that the final report of the Tax Policy Review Committee commissioned by former Finance Minister Dr Omar Davies, more widely known as the Matalon Report, remains a central plank of the Government's tax reform programme.
The report recommends that "the Government consider imposing a standard rate of GCT on the SCT-inclusive motor fuels base".
This means putting General Consumption Tax (GCT) on the full price of gas, including the Special Consumption Tax (SCT) already charged.
According to a leading retailer, the weighted average price of the three main motor fuel types - E10, 90 and diesel - is approximately $60 per litre.
According to the Matalon Report, a tax on gas "has the advantage of yielding significant revenue in the very short run".
http://www.jamaicaobserver.com/news/...S_GAS_TAX_.asp