Gov’t increases tax on gas, diesel

The Government has increased by 50 cents per gallon the excise tax on gasoline.

Prime Minister Ralph Gonsalves made the announcement during the Budget Address on Monday.

Gonsalves, who is also Minister of Finance, also announced lowered gasoline price and increased diesel price as part of the Government’s regular review of the retail prices of these fuels.

He said that the increased tax is expected to yield an additional EC$3 million per year.

The increased excise will not apply to diesel used in the production of electricity, which will continue to be exempted, Gonsalves said.

He said the increase in Excise is not expected to have any “immediate, significant upward impact” on the piece of fuel at the pump, as prices have been trending downwards in recent months.

In the case of gasoline, the entire 50 cents can be accommodated by the lower price of the fuel, which has moved from EC$14.08 to EC$13.95 per gallon.

However, the price per gallon of diesel has increased from EC$13.32 to EC$13.67.

Gonsalves made the announcements as he outlined the fiscal measures that his government will implement this year.

He said that in the current economic situation, globally and nationally, there is little room to raise taxes or large amounts of additional revenue.

“Similarly, there is little room to lower tax rates or to make additional tax concessions,” he told lawmakers in the Budget Speech, which comes in the wake of the devastating Christmas floods that have left EC$330 million in loss and damage, according to Government estimates.

“Our fiscal policy stance for 2014 will therefore continue to be a mix of prudence, patience and enterprise,” Gonsalves said.

He said that in 2013, there were deficits on the current, primary, and overall balance of 2.3 per cent, 3.9 per cent, and 6.3 percent of GDP, respectively.

“The recurrent expenditure was reasonably restrained save and except for the ballooning cost of pension and retirement benefits and salary increase occasioned by the built-in 2 per cent increment and the 1.5 per cent back-pay from January 1, 2011,” he said, in reference to a salary hike due to public servants since 2011 but paid last year.

A 7.2 per cent decline in revenue during 2013 also contributed to the current account deficit.

“The decline in revenue was disappointing coming as it did in a year when nominal GDP was estimated to have grown by approximately 5 per cent,” Gonsalves said.

He further said that while capital receipt increased almost four-fold, it was not enough to outweigh the increase in capital expenditure of almost 180 per cent.

“As a consequence, the overall deficit widened,” he said.

Gonsalves also said there was a decline in tax buoyancy.

This was attributable to weakness in tax administration at the major revenue collection departments, low and declining level of tax compliance by certain taxpayers, and increased level of tax concession, particularly ad hoc concessions, he said.

He said the need for continued institutional strengthening and capacity building of the major revenue departments has become more evident.

Gonsalves presented a budget for EC$911 million, reflective of the Estimates Parliament approved in December.

He, however, indicated that supplementary estimates will be brought to Parliament in four to six weeks to take into account spending necessary as a result of the loss and damage the country suffered during the passage of the trough system on Christmas Eve.

The Budget Debate gets underway on Tuesday, beginning with the response from Leader of the Opposition, Arnhim Eustace.