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Gov't mulls GCT on petrol, but Opposition says no

BY BALFORD HENRY Senior staff reporter balfordh@jamaicaobserver.com

Friday, December 27, 2013    

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The Government will be looking at imposing General Consumption Tax (GCT) on petroleum products next year, but the Opposition says it will not support any increase in taxes, including on petrol.

The proposal has been creating quite a stir within the business community, especially among public transport operators and service station owners. Several spokesmen for the private-owned segment of the public transportation sector have expressed surprise and concern at the announcement that a study will be done and an announcement made by next March. However, because of the limited information available, most stakeholders say that they are awaiting more information before going public on the issue.

But Opposition spokesman on industry, investment, commerce, mining and energy Karl Samuda says that the consequences of any such move would be bad for the economy.

"The Opposition will not support any additional taxation at this time." Samuda insisted.

He said that any further increase in taxes, especially on products like petroleum, which has widespread repercussions in the economy, will only stifle attempts to revive the economy.

However, in its most recent Letter of Intent sent to the International Monetary Fund (IMF) on December 3, the Government admitted that fiscal performance during the first half of 2013/14 was "mixed".

In the quarterly letter to IMF Managing Director Christine Lagarde, the Government confirmed that the new tax measures introduced earlier this year to finance the 2013/14 budget "are not yielding the intended impacts".

In response, the Government has proposed further reform of the GCT, including doing a study by next March, on the scope for imposing GCT on petroleum products. The letter says that the conclusions drawn from the study "will guide possible implementation in financial year 2013/14".

Despite the shortfall, the Government says that it remains committed to implementing the budget for 2013/14, and meeting the associated programmed conditions.

In its Letter of Intent to the IMF, the Government says that it will pay more attention to the complexity of controlling the performance of the local oil refinery, Petrojam, on a cash basis, in terms of the timing and sourcing of oil purchases which result in "large swings". A new cumulative adjuster will be included for the performance criterion on the public sector balance of up to $3.5 billion over the year, to accommodate excesses or shortfalls in Petrojam's overall balance relative to its projections.

Petrojam is a limited liability company jointly owned by PDVCaribe, a subsidiary of Petróleos de Venezuela (PDVSA) and the Petroleum Corporation of Jamaica (PCJ). The PCJ is a statutory body created and wholly owned by the Government of Jamaica since 1975 and has the exclusive right to oil importation and exploration in Jamaica.

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