An amendment to the Annual Stamp Amendment Bill has allowed for dealers of petrol products to be exempted from paying Stamp Tax on the petrol component of their sales.
According to the Minister of Industry and Cooperatives, Oliver Joseph, who presented the bill at a recent sitting of the House of Representatives, this has become necessary as petrol dealers are complaining that the 7% rate for Stamp Tax payments was crippling their businesses.
“In 2013 when we came in, the Annual Stamp Tax was at the rate of 1% of your gross sales and in 2015, it was amended to .75% and after a request by the private sector to consider the rate…in 2017, the rate was dropped further to .7%, so the current rate for the Annual Stamp Tax is .7% and we have listened to the dealers-suppliers of petrol products that complain that this Annual Stamp Tax and gross sales is affecting their business, and therefore they cannot replace the tanks. They have the storage tanks there for a number of years and need to be replaced and they were finding it very difficult because of the payment of the Annual Stamp Tax and the fixed margin,” Minister Joseph said.
In this regard, section 15 (a) of the act was amended to allow for Section 77 of the Tax Administration Act 2016 to take precedence.
Minister Joseph explained, “Under section 15 (a) of the principal act, it says where a person fails to register in the manner required by section 3 (a) or to furnish the Comptroller (of Inland Revenue) with information for the registration process in breach of section 3 (a) is liable to a penalty of $250…,
“…This section had to be repealed because it conflicts with section 77 of the Tax Administration Act 2016, which also provides for a penalty for failing and what the Tax Administration Act said whenever there is a conflict, then the tax administration act will take precedence and because of this conflict, we had to now move to repeal section 15 (a) of the principal act and allow section 77 of the Tax Administration Act to take precedence.”
This was followed by a second amendment, in which section 9 of the principal act was removed and replaced with another section that will allow for the exemption to take place.
According to Minister Joseph, “It says the Annual Stamp Tax on the petrol component, the sale will be exempted because you know service station now sell all type of products. They have all sorts of things you can get for the vehicle and others, some service stations has mini-mart. In these cases, only the petrol component will be exempted from the Annual Stamp Tax, not the other things that they sell”.
The minister told Parliament that because the profit margin for petrol companies is fixed, the payment of the Stamp Tax was stifling and so the government needed to make the amendment to provide some level of ease for them.
“For Gasoline, $1.25 imperial gallon for the company, that’s the fixed margin and for the dealers .98 cents at an imperial gallon. The margin fixed and the gross makes it very difficult for them, so they have approached the government to increase the margins and we said well there are other things that we can do for you to help you, and one of the things we could do is to look at the Annual Stamp Tax and exempt products from the Annual Stamp Tax and that is what this amendment is doing…”, he said.
“…For Diesel, the company margin is $1.25 and for the dealers .75 cents is their profit margin, which I indicated is fixed by law and the sale of their product that is what their profit margin will be and therefore this amendment today is to exempt the petrol component of it from paying Annual Stamp Tax of .7%,”he added.
The amendment, when brought to the sitting of the Upper House of Parliament last Thursday, received a few questions and suggestions from Senators.
Opposition Senator, Kerryne James questioned the reason behind it being just petrol dealers receiving the exemption.
“Those citizens benefit from tax exemptions, however, when these exemptions benefit a handful of individuals or businesses, to me it raises some concerns and therefore Mr. President, I am indeed baffled as to why service stations.
“And I believe Mr. President, rather than an exemption, we know that our fiscal space doesn’t allow for certain things to occur, why not consider lowering the Stamp Tax rate again, so that not only some relief would be given to the service stations but Government would be able to collect some revenue savings.
Labour Representative, Andre Lewis, wondered whether the amendment could trickle down to reflect a reduction in cost at the pumps.
He said: “Whether or not, there can be a possibility, which would dovetail in a possible reduction at the pumps and two, whether the government would have a mechanism in place to ensure that the dealers who have benefitted from this actually reinvest or do investments in their upgrades? Because if one of the driving force is that they are not able to do the capital upgrades that they would want to do – because remember you are increasing the profit margin. This is designed to increase the profit margin and therefore put more return earnings into the hands of the dealers and because it is designed to allow them to do upgrades, the question would be, how do we monitor this?
“…We all know that the price at the pumps are high, we know that this is important because we have not yet brought to the surface oil and gas and therefore whatever we do, we would want to ensure that if it is possible that others apart from the dealers can benefit from this and to ensure that the reason advanced by the dealers is actually put in place for this. Because we will hate to pass by a gas station, five years from now or 10 years from now and you continue to see the deterioration of their premises,” he remarked.
Private Sector Representative, Chris De Allie said although the private sector would like to see Stamp Tax removed altogether, he welcomes the exemption for the benefit of the dealers.
“Where we sit in the private sector, we would like the Stamp Tax to go. We have said so, get rid of Stamp Tax, it’s a regressive tax because you take tax on sales, sometimes that not even materialised as yet, because you have credit sales and cash sales and then you take it at the top and if I am making a loss, I still have to pay this tax but that being said, we understand that government has to raise revenue and we understand that.
“…The reason I support this for the dealers is because I know over the years the dealers complain significantly about the tightness of the margins and quite frankly, dealers who really make any money in gas is those who have high volumes and it’s a volumes business and if you can’t generate the volumes, you’re suffering – because when you have to pay all your overhead costs, it makes it really not a business to get into.