Submitted by Tony “Kite’ Gibbs
The recent proposals by the President of the Barbados Chamber of Commerce (BCCI) to recover road taxes through fuel tariffs at the pump may seem administratively elegant at first glance, but to the non-economist like myself, is riddled with shortcomings, economic and otherwise, which do not appear self-evident to many in the Barbados Economic Society.
Road taxes are fixed charges levied by the government on vehicles for the right to use the roads in this country. Collecting road taxes at the pump through volumetric rates will always result in revenue adequacy problems. There will be over-collection of taxes when the economy is good or when oil prices are low and under-collection when economic circumstances force motorists to drive less. Road taxes collected in this manner will eventually be biased towards over-collection since there can be no conceivable way for Government to true-up and reconcile collected taxes on a month-to-month basis, in a revenue neutral manner, similar to what occurs with BL&P and the fuel clause adjustments.