Motorists will not benefit from a decision by the Ministry of Finance to exempt Paria Fuels Trading company from paying more than $382 million in Value Added Tax.
Finance Minister Colm Imbert confirmed that he had given approval for the newly minted State enterprise not to pay VAT to Government on fuel it had imported and in a whatsap message told Guardian Media that there is no relationship between VAT on imported fuel and on VAT being paid at the pump.
Motorists pay 12.5 per cent VAT at the pump but will not benefit from any relief.
In a letter to Paria Fuel’s Chairman Wilfred Espinet, which GML has obtained a copy, Imbert wrote, “In May, 2019 the government of the Republic of Trinidad and Tobago agreed that in accordance with the provision of section 55 (2) of the Value Added Tax Act Chap 75:06, which applies Section 124 of the Income Tax Act, Chap 75:01, to remission to VAT Act in the sum, $382,499,481,83 on cargoes of refined petroleum products imported by Paria Fuel Trading Company Limited as at April 30th 2019.”
Imbert said the decision to allow Paria not to pay its VAT was in an effort to assist the company with its cash flow.
In response to questions from GML a company spokesman explained that Paria was faced with a situation where it has to payGovernment VAT on all the fuel it imports, including fuel it is buying to resell regionally. However the regional markets do not attract VAT and it takes time for the Ministry of Finance to reimburse Paria the funds. Therefore it is trying to avoid paying VAT on the imported fuel in advance.
The spokesman said: “The request was not for Paria to be exempt from paying Value Added Tax (VAT), but rather for the company not to have to pay VAT on imports in advance. This was having a negative impact on the company’s cash flow, as the company then had to turnaround and reclaim the money from the Government as VAT on export sales is zero-rated. For local sales, Paria collects VAT on its receipts and remits this to the Government.”
On Monday night, leader of the Opposition Kamla Persad Bissessar alleged that fuel prices will rise and there will be shortages at the pump because of the challenges Paria was facing in acquiring US dollars to buy fuel.
Two months ago, the Sunday Business Guardian reported the forex challenges that Paria was facing.
In an interview with the company’s Chairman Wilfred Espinet he admitted that it was a nightmare finding the US $20 million a month in the banking system to buy fuel.
He said: “There is a substantial shortfall between the amount of foreign exchange earned by Heritage and the amount needed to import fuels each month by Paria. The shortfall is approximately US$20 million a month and is currently accessed through the local banking system. The process of finding a supply (of US dollars) in time to meet payment schedules is extremely challenging.
My understanding is that there is no regulation in force that will allow foreign exchange to be directed to these imports on a priority basis. As a consequence, cargo often arrives in Trinidad and delays in payments for the shipment results in significant demurrage that has to be absorbed by the company.”
Espinet added: “While we seek to find a source for the foreign exchange shortfall, this imbalance is structural. The ultimate solution is to introduce policies to encourage a more prudent approach to fuel consumption. This is consistent with obligations restricting our emissions.”
In January this year the Chairman had also urged the government to pay its bills on time, which the Minister of Finance Colm Imbert tried to rubbish saying that the matter did not arise since the government was not at the time owing Paria money. However, its clear from the time frame being exempt, Government was in fact owning Paria VAT refunds in January.