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Major spike in fuel prices – GOB absorbs until the end of March

GeneralMajor spike in fuel prices – GOB absorbs until the end of March
Pump prices fell in Belize at midnight on Friday night, March 11, after the Government brought into force a new statutory instrument that suspended the collection of general sales tax (GST) at the pumps.
  
In Belize City, the price of premium gasoline fell by 11 cents on the gallon to $10.39, while the price of regular gasoline fell 6 cents on the gallon to $10.13. Diesel prices dropped the most, by 24 cents, to reflect a pump price of $9.61.
  
Pump prices were expected to increase by about a dollar on the new shipment, as world market prices were rallying upward amid the turmoil in Africa and the Middle East.
  
With GST, prices would have been $11.69 for premium, $11.39 for regular and $10.81 for diesel, said Prime Minister and Minister of Finance Dean Barrow at the reading of the new national budget on Friday, March 11.
  
He announced that, “Effective today, we will sign into law a statutory instrument that will zero-rate the GST on gasoline, illuminating kerosene and diesel. In its place, we will increase the import duty on gasoline and diesel by a fixed, specific-rate amount. This amount will not be what the GST take is currently, at over 100 US dollars a barrel; but what the GST take was when world oil prices were in the US$85 per barrel range.”
  
The international press is reporting today that crude oil prices are falling on account of the Japan earthquake and tsunami, which are expected to slash demand from that country. Prices are now hovering much closer to the US$100 a barrel cost, the lowest in about a month.
  
According to Barrow, the prior spike in world prices has meant that the government has gained substantially in the collection of general sales tax from the pumps, which had been charged at a rate of 12.5%, an increased rate which took effect last April.
  
When the Barrow administration came to office in 2008, it removed Revenue Replacement Duty on imported fuels and replaced it with a lower import duty, charged at a fixed rate. In 2009, the administration introduced a $1.00 flat tax on each gallon of fuel sold, in addition to the GST.
  
“Under this new regime, changes in the acquisition costs were expected to pass through fully to the consumer, with no price distortion arising from variability in government taxes,” said Barrow. “However, with the recent huge jump in the world prices for fuel, there has been an unintended gain to Government through the GST.”
  
The Prime Minister did not specify how much additional revenue the government had gained from the recent spike in world prices.
  
“There is a shipment of fuel due today,” said Barrow, “and the pump prices were to increase by about BZ$1.20 per gallon for gasoline and BZ$1.00 for kerosene and diesel. What Government will do is, as I indicated, remove the GST.”
  
The tax relief will be in effect only for this shipment, however. “We will therefore make a huge revenue sacrifice. But I caution that this is a one-time-only gesture,” Barrow said.
  
A new shipment is due to arrive at the end of March, and, Barrow cautioned, “…we will not any longer be able to avoid some massive increases due to the spiraling international price that we can’t control.”
  
He said that with the changes that took effect Friday, Government is absorbing a revenue loss of about 1 million dollars for this shipment.
  
The additional import duty to replace the GST will be charged on gasoline and diesel, but not on kerosene.

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