Maravi

Expert advises govt over revenue from fuel taxes

Expert advises govt over revenue from fuel taxes
By Joan Chirwa and Fridah Zinyama
Friday June 13, 2008 [04:00]

GOVERNMENT can still accumulate a reasonable amount of revenue from fuel taxes on account of increasing consumption levels instead of removing subsidies, energy expert Andrew Kamanga has said. But energy permanent secretary Peter Mumba said the government's decision to remove fuel subsidies still holds, only hinting that the ministry would propose a review of the current tax structure for fuel to make it more responsive to consumer needs.

Reacting to the government's decision to phase out fuel subsidies by the end of this month, Kamanga said the current fuel taxes were quite high to guarantee a reasonable revenue collection by government.

"At the beginning of the current budget year, government made pronouncements to collect a fixed amount from fuel levy," Kamanga said. "But if they government are now going to let prices go up, which the ERB will be doing in view of the removal of a subsidy on fuel, then government will collect even more from consumers in form of fuel levies."
Kamanga said Zambia's consumption levels for fuel had been increasing owing to massive investments placed in key economic sectors such as mining, hence raising revenue collected by the government.

"Government should therefore consider reducing taxes on fuel so that its decision to stop subsidising fuel does not have any effect on the economy," said Kamanga.
According to data compiled by Energy Regulation Board (ERB), diesel consumption in August last year was recorded at 44.3 million litres, from about 30.9 million litres consumed in January the same year.
A total of 14.1 million litres of petrol were consumed in August last year, with a very minimal increase from the January figure.

And on every litre of fuel, an average of 55 per cent of the cost goes towards taxes. For example, on every litre of petrol, a consumer contributes 16 per cent as value added tax (VAT), excise duty at 45 per cent, road levy at 15 per cent and import duty charged at five per cent. For diesel, the only difference is the excise duty, which is charged at 15 per cent, explaining the slightly lower pump price of the commodity at service stations.
And Mumba said the government would not change its position to stop subsidising fuel as it had become unsustainable.

Mumba however said the government would look at best ways of approaching the issue, such as revising the tax structure for fuel.
"It is not a secret that once the subsidies are completely removed, the pump price for fuel will go up," Mumba said. "I think we also need to look at the current tax structure for fuel."

Mumba further said the government was considering holding discussions with Independent Petroleum Group of Kuwait - the appointed supplier of crude oil - to establish ways of mitigating increasing prices of oil on the international market as the current pricing arrangement with the contractor was not fixed.

Mumba said the government has submitted its recommendations to Zambia National Tender Board (ZNTB) on the bank, which is supposed to finance the crude oil from IPG.
He said four institutions had expressed interest in bidding for the financing of crude oil and that ZNTB would announce the preferred bank by next week.

"The four institutions which bid to finance the crude oil are Zanaco, Citibank, PTA and Finance bank," he said. "We are hopeful that the financial institution chosen will not take time to finish negotiations."
Mumba hoped that the bank that would clinch the deal would hasten the negotiation process unlike the other negotiations that had collapsed.

And during the launch of the energy conservation week under the theme 'Energy Efficiency- Achieving sustainability together' which will be commemorated from June 12 to 14, Mumba said it was important for citizens to efficiently use electricity so that the country does not suffer from any further shortages which could affect the economy negatively.

Labels: ANDREW KAMANGA, PETER MUMBA, TAXATION

posted by MrK @ 4:35 AM