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Remove VAT from gasoline

On Energy Chamber’s budget wish list:

The Energy Chamber of Trinidad and Tobago has proposed several measures for the upcoming 2014/2015 budget which it said yesterday are linked to attracting investment, incentivising exploration and production, facilitating local energy service company growth and helping Government reduce expenditure.


One of those recommendations to the Ministry of Finance involves removing value added tax (VAT) from the wholesale price and the retail margin on gasoline for vehicles.

“The Energy Chamber has concentrated its budget recommendations on attracting investment around a few objectives: developing new gas reserves and security of gas supply and reversing the decline in oil production. Some of these recommendations however are not proposals for one financial year but rather speak to shifts in policy, regulations and incentives over time,” the business group, formerly the South Chamber said in a statement.

“Policy must therefore focus on ensuring that the structure of the energy market creates conditions in which continued investment takes place. The key to attracting investment dollars into the gas industry is to ensure that all operators along the gas value chain gain rewards which are commensurate with the risks taken to operate. Under the current structure upstream reward is at set prices and commodity price risk is not shared. Exposing the upstream producers to commodity price risk will enable them to share in the reward when prices are high.”

“Also given the current issues with gas supply, we recommend a regular monthly forum, lead by the (National Gas Company), where upstream and downstream operators share information on maintenance. The services sector must also be briefed on any planned or unscheduled maintenance issues. This forum must be a separate dialogue session from upcoming contract renegotiations between the NGC and its upstream suppliers or downstream clients,” the Chamber said.

To arrest the decline in oil production, there are a number of solutions to choose from to incentives investment in both new marginal fields and mature fields.

“For new marginal fields, we recommend targeted reductions in Supplemental Petroleum Tax to incentives new investment.

For mature fields, increasing the investment tax credit(ITC) rate from 20 per cent to 100 per cent should be allowed on all capital expenditure incurred (ie, infrastructure and development drilling capital expenditure). For development drilling, the proposed increase in the ITC rate from 20 per cent to 100 per cent not only allows for more resources for further drilling but would also ensure resources are available for investment in ageing infrastructure, allowing for safer working conditions and easier access to reserves.

The Energy Chamber also recommends restructuring Petrotrin in a way which optimists resources and streamlines operations for both the upstream and refinery business units. For the upstream, getting the untapped and underdeveloped acreage into the hands of the right players is essential if we are to attract new investment,” the Chamber said.

The Energy Chamber’s said its focus for reducing Government expenditure revolves around reducing the fuel subsidy.

“We recommend the commissioning of a comprehensive study on the impact of subsidy reduction/removal on food and transport as well as creating a fuel subsidy reduction road map. This roadmap should explore reducing subsidy levels incrementally on all fuels by the same percentage, developing CNG infrastructure to accommodate heavy goods vehicles, providing a window for accessing concessions for all heavy goods vehicles as incentive to convert fleets to CNG and ensuring that plans are in place to phase out the subsidy once uptake of CNG conversion and investment in CNG retail stations occur.”

It added: “We also recommend removing VAT on the wholesale price and retail margin for gas as VAT is charged on the value added at each stage. Currently it is charged on the Retail margin and on the Wholesale Price. However, this is counter intuitive given that on one hand VAT is paid to the government but on the other hand the government gives a subsidy,” the Chamber said.
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