Ministry passes turnover tax on gas on to consumers

POSTED: 10/15/14 7:33 PM

St. Maarten – Did the Ministry of Tourism, Economic Affairs, Transport and Telecommunication make a blunder with the calculation of the new gas and diesel prices it published last week? The argument for an affirmative answer to this question is to be found in the ordinance that regulates the turnover tax.

Article 6 of this ordinance states: “The tax is calculated over the turnover the entrepreneur has realized for his company in the area the levy applies to.”

That is clear: if a company sells a product for 1 guilder it has to pay 5 percent turnover tax to the government – but it is not allowed to add that 5 percent to the guilder it charges to customers.

This is exactly what the government seems to be doing with the calculation of the gas and diesel prices. We would not have noticed it, but a post by Emilio Kalmera on Facebook drew our attention to it. “In this example you see clearly how Gov itself is misusing the use of TOT (turnover tax – ed.) as if it is a sales tax. They don’t even understand their own ordinance. Lord have mercy!!” Kalmera wrote.
Knowing Kalmera as some sort of financial whizz kid, that remark inspired a closer examination of the price build-up the government posted.

Sticking to the example for unleaded gas, it becomes clear how the government arrives at a maximum wholesale price of 2.07 guilders. On top of the Petrotin posted price of 1.408 guilders per liter comes freight (0.063), import duty (0.29), liquid throughput fee (0.08) and the wholesaler margin (0.23).

This brings the maximum wholesale price to 2.07 guilders ($1.156) per liter. The wholesaler ought to pay 5 percent turnover tax over the product he sells for this price to retailers – 10.35 cents.

The government however adds this turnover tax to the price, then adds the margin for the retailer (14.5 cents) to arrive at the consumer price of 2.318 guilders. On top of that price, the government adds again 5 percent turnover tax (11.6 cents) and then concludes that the maximum consumer price including tax is 2.434 guilders, or $1.36.

It seems therefore that the price includes twice turnover tax that is passed on to consumers, while these taxes are actually for the account of the wholesaler and the retailer.

Leaving the two layers of turnover tax out of the equation, the actual price consumers ought to pay for unleaded gas is therefore 2.214 guilders, or $1.236. Similarly, the correct price for diesel should be 1,826 guilders ($1.02) instead of 1.911 guilders ($1.067).

 

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