By RASHAD ROLLE
Tribune Senior Reporter
A TOP financial expert says reducing taxes on gas in response to soaring prices would be unwise and short-sighted.
Gowon Bowe, chief executive officer of Fidelity Bank, said people should better ration their gas expenses and consider such cheaper solutions as public transportation and carpooling in the wake of rising fuel prices.
The Bahamas Petroleum Dealers Association (BPDA) has threatened to strike because members are losing money from the spike in oil prices.
Vasco Bastian, BPDA vice president, has said value added tax and stamp taxes should be alleviated to help operators.
Mr Bowe, however, said it is a slippery slope to have the government reduce taxes in response to cost increases. He said: “As food items go up, as the cost of fruits go up, as the cost of grain and bread goes up, are we going to say that for every item that goes up in cost that the government needs to have a knee-jerk reaction which is (to) remove the tax?
“The government can only provide its services by the revenues it collects, so whenever the government makes a decision to actually remove taxes on any item that it currently taxes by virtue of our tax system, it needs to understand how it replaces that tax.
“I think persons are looking at the fuel price at the pump and not appreciating that actually the taxes on fuel are not based on the dollar at the pump, meaning what the distributors pay. “It is based on the actual gallons so there is a fixed dollar cost that the government actually imposes. When the price from where we buy it goes up, yes, the fuel price goes up but it’s not the taxes that are driving up the fuel price, it is the underlying price of fuel.”
Some jurisdictions have responded to the global gas price increases by adjusting taxes. In Connecticut, USA, a law was passed that suspends excise tax on gas from April 1 to June 30th. Similar action was taken in Georgia.
Mr Bowe said the amount of VAT people pay on gas has not increased much even as gas prices soar.
“The issue on the value added tax is if you pause and think about it this way,” he said, “when fuel was $4.50 value added tax would’ve been 45 cents. Now that fuel is $6 value added tax is 60 cents. The actual incremental cost on the fuel is not as large as people think because the move from $4.50 to $6 is not driven because of value added tax, it is actually driven because before an oil tanker used to bring it in at one price, now that price is escalating.
“When we start having the conversation about what the government should do in order to ease the burden of citizens, first thing let’s compartmentalise this. Do we believe that all citizens need the support? If the answer to that is no, is removing VAT going to be a targeted assistance for the persons who can least afford it? And if the answer to that is no, is the VAT removal the most appropriate mechanism? And I would say to you the answer is absolutely not.
“If I have a vehicle and I’m putting fuel in the vehicle and I decide that I just ride up and down because I could afford to do so I need to change my lifestyle. The individuals who are poor may need to look at carpooling. They may need to look at using the public transport system. They may need to look at what is the best use of my energy sources in terms of not just dashing to the food store every ten, fifteen times a week because that is easy enough to do so. If government changes its tax structure it is either going to have to remove services that it is providing using those tax resources or it is going to have to borrow, and if this fuel escalation is somewhat temporary, do we change a system for a temporary fix or do we as citizens take responsibility and say we have to adjust our lifestyle?”