Government continues to apply concessional tax rate on fuel

RECENT reports in the media regarding an increase in excise taxes being charged on diesel and gasoline have been addressed, and concerns have been allayed by the current administration via the Ministry of Finance last evening.In a statement to the press, the Ministry of Finance made it clear that it continues to apply a concessional tax rate on fuel, and the movements of oil prices on the world market will not affect current prices.

Oil prices have dropped on the world market, triggering the expectation that gas and diesel prices will also decrease.

A NORMAL PRACTICE
However, the normal practice, as publicised by the media as recent as the last four years, is that Government’s policy is to ensure that the consumer does not feel the pressure of any fluctuation in oil prices.

For example, consumers paying $980 per gallon at the pumps will pay that same price when oil prices go up, because Government would have lowered the excise tax. On the other hand, when oil prices go down, Government increases the excise tax but consumers will continue to pay the same amount.
In this way, the commodity market relative to gasoline and diesel remains constant, in the interest of the Guyanese people.

This is a welcome move in many sections of the private sector, given that increases and decreases in oil prices invariably fluctuate every quarter of every year.

The Finance Ministry has said that the tax rates being applied continue to be highly concessional relative to the standard rate of 50 percent, and when the world market prices for gasoline and diesel increase, the excise taxes are expected to again be reduced.

“The Government has in place a longstanding and well-functioning mechanism under which the ad valorem tax rate on fuel products is adjusted downwards when the world market price for fuel moves upwards; and vice versa: it adjusts upwards when the world market price for fuel moves downwards,” the Ministry said.

ENSURING STABILITY
The Ministry of Finance contends that this mechanism has been put in place to ensure that consumers are cushioned from spikes in the world market price. The Ministry also contends that the mechanism has functioned effectively in protecting the Guyanese consumer from exorbitant price fluctuations when the world market prices reflect high volatility.

The Ministry said, “Accordingly, the price consumers pay at the pump for gasoline and diesel has remained stable over recent years because this administration has made appropriate interventions by adjusting the excise tax rate.

“The ability of the Government of Guyana to stabilise the cost of diesel and gasoline has also ensured that the cost of production of goods and services which require fuel inputs does not adversely affect consumers”, the release has said.

The Ministry is expected to continue monitoring the acquisition cost of refined fuel products, and would make the appropriate interventions by adjusting the excise tax rates in order to minimise any adverse consequence on the economy from fluctuations of oil prices on the world market.