A SUGGESTION has come from the Office of Utilities Regulation (OUR) that Government free Jamaica Public Service Company (JPSCo) from paying tax on its oil bill, and recoup the $770 million instead from the utility's customers.
OUR Director-General J. Paul Morgan, speaking in Mandeville yesterday, said he subscribed to the view that it was not good policy to tax the inputs to means of production, but to tax the outputs.
He suggests that Government add General Consumption Tax (GCT) to light bills instead of taxing the supplier of the service, arguing that it would result in cheaper fuel charges and save customers money.
Last night JPSCo said it was not averse to the proposals, and had broached similar suggestions to the Government in the past, but got no response.
"We are willing to support any initiative that will save on fuel costs," said Sam Davis, JPSCo manager of government and regulatory affairs.
Speaking at a meeting of the Rotary Club of Mandeville held at the Golf View Hotel, the OUR head noted that the removal of taxes from JPSCo's oil bill, which he said totals some $10.6 billion, would result in a two to three per cent reduction in the fuel charge on customers' bill.
Davis was non-commital on the benefits to customers, commenting only that 'on the face of it' some savings were likely.
TAXING THE OUTPUT
In the meantime, Mr. Morgan said the Government could 'exercise some interesting options in how the output is taxed.'
Residential and commercial accounts, referred to by JPSCo as rate 10 and 20 accounts, should be subject to GCT, but the rate 40 and 50 industrial accounts would be exempt, he proposed.
He argued that such an initiative would reduce the costs to the productive sector, while the tax would act as an incentive to residential and commercial entitites to conserve on their energy usage.
A release on Mr. Morgan's speech, said his comments were made against the background of calls for a freeze on utility rates because of the Memorandum of Understanding between the Government and the island's trade unions.
He reiterated that the OUR could not give any such undertaking, because the assessment of rate increase applications are based on objective analysis.
The OUR Director-General said while he was not belittling the implications of the MOU, nothing in it - except the Government's commitment to keep inflation down - would impact on the operations of the utility service providers.
Mr. Morgan told the Rotarians that this initiative, though outside the mandate of the OUR, was being put forward because he and the agency were concerned stakeholders.
He said if the productive sector got a break on its energy bills, this would hopefully result in improved competitiveness, higher output, more business and by extension more revenues to the Government.
"A win, win situation for all," said Mr. Morgan.
