Tax reduction yielding positive results at petrol outlets
- but some minibus drivers still charging higher fares

Guyana Chronicle
February 17, 2003

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`...maintaining the increased fares is unjust and unjustified' - Dr. Roger Luncheon, Head of the Presidential Secretariat

THE recent decision by the Government of Guyana to lower the Consumption Tax (CT) on fuel has reflected positive indications, according to Head of the Presidential Secretariat and Cabinet Secretary, Dr. Roger Luncheon.

The effects of the Venezuelan oil crisis are being felt in Guyana, since Venezuela is Guyana's main petroleum supplier. Petrol dealers were faced with an increased acquisition cost of diesel and gasoline following the massive strike in Venezuela, which seriously affected the oil industry there.

They in turn increased their prices and as a result the mini-bus operators and taxi drivers raised fares.

In an attempt to shield commuters from the brunt of the inflated fares, the Government of Guyana reduced the CT on gasoline and dieseline.

As a result, importers of gasoline benefited from a 30 per cent and 20 per cent reduction in the tax on Gasoline and dieseline, respectively.

"The steps taken by the Government to restrict rising fuel prices have indeed led to pump prices being lowered and maintained at a reasonable level of about $330-$350 per gallon," Luncheon told his regular post-Cabinet news briefing last week.

However, Cabinet noted that some mini-bus operators plying certain routes have refused to lower their fares to reflect the fall in fuel prices, he said.

"Cabinet is again calling on those operators to recognise that maintaining the increased fares is unjust and unjustified and Cabinet is also calling on commuters to resist paying these increased fares which are clearly unjustified," he said.

This new reduction in the CT besides arresting any negative effects on the economy, will serve to stimulate it.

The stability in transportation costs is one of the crucial areas in the economy, which had to be considered in wake of the rising fuel prices.

The Government's timely intervention to determine the market price of fuel by implementing CT cuts has arrested the threat of a sudden rise in the cost of living and the general inflation rate.

Since the oil crisis started in late 2002, the Government announced on January 9, 2003 that "in response to the recent escalation in the international market price for oil and the consequential impact this has had on various sectors of the domestic economy, it has taken the decision to reduce the Consumption Tax on both gasoline and dieseline."

With the decision to reduce the CT on gasoline by 30% and diesel by 20% the Government said it did "not expect that there will be any increase in public transportation fares or in prices of other products."

The manufacturing and agriculture sectors would benefit tremendously from this decision to reduce the CT.

Transportation cost is the gateway to pricing goods and services. It is expected that the subsequent fall in transportation cost will benefit the population and the economy as a whole.

The majority of fuel wholesalers have indicated their intentions to let market forces determine demand and supply and have signalled their intention to reduce their prices.

Government made the CT decision because it was recognised that there would be a spill-off effect on every individual in terms of lower transportation costs and the resulting effects of lower/stable prices for goods and services.

While the loss in revenue to Government will be substantial, financial analysts feel that non-intervention would have been more detrimental to the economy. (GOVERNMENT INFORMATION AGENCY - GINA)

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