The Government has removed the General Consumption Tax (GCT) on electricity bills for all residential customers, making good on an election promise.
This was announced by Prime Minister, the Most Hon. Portia Simpson Miller on June 5, while making her contribution to the 2012/13 Budget Debate in the House of Representatives.
SUSTAINED OBJECTIONS to the Government‘s announced increase in general consumption tax (GCT) on the use of electricity above the 300 kWh threshold have prompted the Portia Simpson Miller-led administration to remove the tax measure altogether from residential customers.
Simpson Miller, in her contribution to the 2012-2013 Budget Debate, also announced yesterday that businesses that use more than 300 kWh of electricity could reclaim the tax.
Hours after Finance and Planning Minister Dr Peter Phillips announced the 16.5 per cent GCT on electricity use above 300 kWh on May 24, pressure began to mount as public outcry grew louder against the decision.
Simpson Miller, who had promised a roll back in GCT on electricity during the election campaign declared yesterday that she had “heard the cries of the people” and felt their pain.
“It was not possible to fulfil all the promises in the five months based on the conditions we found. As a responsive Government, after discussion with the minister of finance, the decision has been taken to completely remove GCT on electricity bills for all residential customers,” Simpson Miller stated.
The charge on electricity was expected to rake in $430 million in taxes for the current financial year.
However, Simpson Miller did not explain how the administration would recover sums that had been given up with the decision to roll back the tax.
She told the country that her finance minister would provide details on the roll back as well as address other revenue measures when he closes the Budget Debate today.
Budget goodies
Removal of GCT on electricity to residential customers
Sharp cut in interest rates for NHT contributors:
– From three per cent to one per cent
– From Five per cent to three per cent
Extension in one per cent interest rate reduction to public sector workers
– From March 31, 2013 to March 31, 2015
Cut in NHT rate by one per cent for hotel workers earning $10,000 or less per week
$1.2 million grants to NHT applicants earning $10,000 or less per week
The award of 50 ‘Jamaica 50′ scholarships to students
edmond.campbell@gleanerjm.com
http://jamaica-gleaner.com/gleaner/20120606/lead/lead2.html
ALTHOUGH chicken remains exempted from General Consumption Tax (GCT) under the Government’s new tax measures, the price of the popular protein will be increased because of the hike in the tax on electricity announced by Finance Minister Dr Peter Phillips last week.
At the same time, local manufacturer and distributor GraceKennedy says the imposition of GCT on corned beef will push the popular tinned meat out of the reach of the average consumer.
|
|
Jamaica Broilers Chief Executive Officer Chris Levy yesterday confirmed that higher electricity costs, which his company will not be able to recover, will result in a hike in the cost of chicken meat.
“Without a doubt it is going to affect us, because with the tax on electricity going up, this is going to flow through to our consumers in the price of chicken,” Levy told the Jamaica Observer.
According to Levy, the company is now in the process of working out what the impact will be on the current price.
“We got the ministry paper Saturday and we are trying to work this thing through because the impact is not only for us but also for our suppliers and contract farmers,” he explained.
Last Thursday in his Budget presentation, Dr Phillips had announced that GCT on electricity usage of 300 kWh and above will be increased from 10 per cent to 16.5 per cent effective June 1.
Companies are able to reclaim GCT paid on electricity from the tax collected on the goods and services they provide. However, companies which supply tax-exempt goods are not able to recover this GCT.
Yesterday, Levy said it was still too early to finalise the impact of the increased costs to Jamaica Broilers’ as the model being used for its contract farmers also has to be worked out.
“Whatever happens is going to happen between now and Monday when these changes become effective,” he said.
Chief executive officer of GraceKennedy Don Wehby said an internal analysis has since shown that the addition of GCT on corned beef will affect consumer demand of a food which is relied upon a lot by low-income householders.
“At GraceKennedy we have done quite a bit of analysis on the removal of GCT on basic food items and we have some major concerns which we will be writing to the minister about,” Wehby said.
GraceKennedy, he said, will be calling for the removal of GCT on corned beef, which is an imported item.
“We believe they should remove it from corned beef because we have gone out there and done the sensitivity studies and have done our best to look at how to cost it out and it is just not good,” he said.
While corned beef is expected to be most affected, Wehby said it is just one of several basic food items which will be impacted by the tax measures.
“We are looking at all the various ways in terms of how the group of companies can become more cost-efficient to try and minimise the impact to our consumers and customers,” he said.
Wehby also said the increase in GCT on electricity will have both a “cost implication” as well as a “profitability consideration” for the GraceKennedy Group of companies, which also offers banking and securities services.
He explained that since the services of the bank and securities companies in the group are exempted from GCT, these companies will not be able to recover the 6.5 per cent increase on electricity charges, hence making this a direct expense to them.
“We have some of our manufacturing plants which manufacture goods that are also exempt from GCT and so we will not be able to recover some of the incremental costs, including that of electricity,” Wehby said.
He added further that the group is trying its best to keep the cost to the consumer at a minimum, as the market is very competitive.
“We are now spending a lot of time looking to see how we can become more efficient as a group because you can’t assume that you can just pass on the increase to the consumer, because it is very competitive,” he said.
“We are now spending a lot of time looking to see how we can become more efficient as a group because you can’t assume that you can just pass on the increase to the consumer, because it is very competitive,” he said.
Yesterday, president of the Jamaica Manufacturers’ Association (JMA) Brian Pengelley said the increased GCT on electricity will further impact the cash flow of a lot of companies.
He explained that with GCT being a credit/debit situation most people will be able to reclaim the tax in a 30-day period. However, this will impact on the management of a company’s cash flow.
He explained further that what can be passed on to the consumer is driven by what is the available tax the consumer has to pay.
“So companies will have to look for more efficiencies, maybe to mitigate that, because you can only pass to the consumer what they are willing to pay,” the JMA head said.
The management of Carib Cement agreed that the increased GCT on electricity will impact the company’s cash flow, but said it should not directly affect the cost of cement.
“At this time I would not make the comment that it will be rolled into the product but the financing cost of operation is one that ultimately factors into the pricing of our product, so to the extent that the financing is impacted it would be in that manner,” said Orville Hill, Carib Cement’s finance manager.
While the impact of the increased GCT by itself will not necessarily trigger a change in cement prices, Hill said the company will be looking at a number of other issues and incorporate those factors in adjusting price correction as needed.
Read more:
Damion Mitchell, Editor – Radio & Online
The Finance Minister Dr. Peter Phillips has indicated that he is willing to make changes to the announced taxes to raise almost $20 billion for the Government
BUSINESSES will suffer as the Government raises the general consumption tax (GCT) on electricity to help fund its $613-billion budget, said two affected associations.
The Jamaica Manufacturers’ Association (JMA) and the Micro, Small and Medium-sized Enterprises (MSME) Alliance both said the new measure will be too much for companies operating in an already difficult business environment.
|
GCT-free solar panels are generating huge interest among businesses struggling with electricity costs, said the Jamaica Manufacturers’ Association
Debbie-Ann Wright, News Editor Opposition leader Andrew Holness says the current Jamaica Public Service Company (JPS) licence is a deterrent to generators of electricity entering the energy market. While the JPS has a monopoly on transmission and distribution of energy, other power producers are free to operate in Jamaica. However, Holness said under existing legislation, producers of energy in commercial quantities must sell to the JPS, which then resells it to customers through its transmission and distribution network. Holness argued that there is an opportunity for adverse transfer pricing, which works against the interest of the consumer in receiving competitive prices for energy. He has reiterated calls for the government to look at separating the generating assets of the JPS from its transmission and distribution assets. Holness said this would allow all generators of electricity to negotiate on equal footing with the deregulated entity that controls the transmission and distribution assets formerly owned by JPS. However, he cautions that the government should seek to dismantle through dialogue and negotiation. http://jamaica-gleaner.com/latest/article.php?id=37559
 Increase in Tax Free Threshold for Residential Customers
The Government has increased the tax free threshold for residential customers who pay GCT, from 200 kWh to 300 kWh. According to JPS this means that a smaller percentage of residential customers – just over 10 percent – will now pay GCT on their electricity bills.
Increase in GCT from 10% to 16.5%
The GCT that is applied to electricity usage will move up from 10% to 16.5%. All business customers will pay GCT at the new rate.
The following miscellaneous charges that previously attracted 10% GCT, will now attract GCT of 16.5%:
The amendment to the GCT regime for electricity is causing jitters in the petroleum retail trade. The threshold for electricity that will be taxable will be increased to 300 kilowatts per hour and the rate changed from 10 to 16-point-5 percent as of
THE PORTIA Simpson Miller administration has reneged on its promise to abolish general consumption tax (GCT) on electricity. Making his opening presentation in the 2012-2013 Budget Debate in the House of Representatives yesterday, Finance Minister Dr Peter Phillips announced changes to the way in which GCT is to be charged. The minister said that, as of June 1, no GCT will be charged on the first 300kWh of electricity consumed, up from 200kWh. However, the tax will move from 10 to 16.5 per cent. The measure is expected to earn the Government $430 million this fiscal year. In the general election campaign last year, Simpson Miller declared that her administration would remove GCT on electricity if her People’s National Party was elected to form the government. The promise was also contained in her party’s election manifesto. Yesterday, Phillips told the House that of the approximately 500,000 JPS residential customers, 377,000 consume less than 200kwh of electricity. He said the new tax directives will result in 90 per cent of JPS customers not paying GCT on light bills, up from the initial 76 per cent. “The proposed measure should relieve approximately 80,000 additional residential customers from the payment of GCT on their electricity bill at the new threshold level of 300kWh, leaving only 52,000 residential customers subject to GCT,” Phillips said. Just last month, Minister of Science, Technology, Energy and Mining Phillip Paulwell said Government intended to honour its election promise to roll back the consumption tax on electricity usage. “There is a commitment that was given to the people of Jamaica which we intend to fulfil,” Paulwell said during a sitting of the House of Representatives. Proposal questioned North East St Catherine Member of Parliament Gregory Mair, who had tabled questions of Paulwell in the House, had suggested that the Government seek to raise the threshold to 300kWh instead of rolling back the tax. Relying on data provided to the House by Paulwell, Mair said only eight per cent of residential consumers would not benefit if the threshold was increased to 300kWh. “That would mean that 92 per cent of residential consumers would not pay GCT and the total amount of GCT collected would reduce only by $250 million,” Mair had argued. http://jamaica-gleaner.com/gleaner/20120525/lead/lead7.html 
The Finance Minister has defended the decision not to remove the GCT on electricity. During the 2011 general election campaign, |
