By February 2023, the Ministry of Finance is expected to report on the performance of the decision to cap freight prices at 2019 levels with a projected loss of $4 million in state revenue, as part of relief measures amidst the cost of living crisis.
This was disclosed in a sitting of the Lower House of Parliament last Friday by Prime Minister and Finance Minister Dickon Mitchell, who moved a bill to amend the Customs Act of 2015, seeking approval for a retroactive commencement date for the cap on freight costs, which took effect on October 1 for six (6) months.
The Member of Parliament (MP) for St. David was at the time responding to concerns raised by Opposition MP Emmalin Pierre, who questioned the need for the revenue-losing relief measure that was recommended by members of the business community, who are expected to pass on the benefits to consumers.
The former Education Minister expressed doubt that the freight cap, which was implemented by the Congress regime four (4) months after assuming office, will achieve the desired results, and questioned “whether or not an analysis was done to show that this particular decision would impact or reduce the cost of living.”
“Several business persons,” she said, have revealed that “they were not seeing how that particular action at the time was going to result in a reduction (in the cost) of goods for the consumer.”
MP Pierre also questioned “whether or not an analysis was done to determine if there is a need for the current changes (amendments to the principal Act) that we are going to make” referencing the “Public Finance Management Act,” which “requires” an analysis of such fiscal measures.
Finance Minister Mitchell confirmed that “extensive analysis was done to determine whether or not we should proceed (with the freight cap),” and noted that the Act must be amended to legalise the freight cap as the current format mandates how goods are to be valued to charge customs duties.
“The aggregate of cost and charges of transport of imported goods to the Port, or the place of importation, and the loading and handling charges associated with the transport of imported goods to the port, or place of importation,” the Prime Minister explained, are among the factors taken into account in determining the value of goods, as outlined in section 78 of the Act.
“And, therefore if we wish to use the cost associated with 2019, the current legislative framework does not permit that, unless there’s an amendment…” said Prime Minister Mitchell.
The Customs Amendment Bill, which must also be approved by the Upper House before it comes into effect, is designed to allow for the Minister of Finance to announce amendments by an order that must be published in the Government Gazette.
It also confers on the Minister of Finance the right to amend Schedule II of the Act in order to give legal effect to the administrative actions taken by the government concerning the freight rates from October 1, 2022.
The Minister’s power may be exercised generally for future matters on the Schedule to expeditiously implement governmental measures,“ should the need arise again to address custom duties as a result of market conditions, continued crises that may lead to increases generally in the cost of goods…” PM Mitchell explained.
Contending that “a decision like this will have implications on our fiscal situation,” Opposition MP Pierre told the House “now we are removing the powers from the Parliament, and we are giving that to the Minister to make decisions as to whether or not those changes are made at any time” she “was expecting a little more in-depth presentation coming from (the Ministry of) Finance from an analysis perspective” in terms of “how do we explain the benefits, (of) the impact.”
The female opposition MP also queried “what are we likely to lose as it relates to this particular action… mindful of all of the concerns we have with regards to threats that are out there, and a possible decline in terms of our fiscal situation?…”
Prime Minister Mitchell defended the policy decision of the six month old Congress administration on the grounds that “there are a host of other measures, some of which have been carried on by (previous) governments for years, which are aimed at easing the cost of living burden.”
Among them is the 20 lb LPG cooking gas cylinder, which is being “subsidised by almost $100%” at a stable price of $40.00, and “is currently costing the government somewhere in the region of EC$7 million to EC$8 million.”
Prime Minister Mitchell also informed the Lower House that the freight cap is “intended to be a short-term measure that we monitor to see if there is an easing.”
“We would measure and…certainly by February we will be able to determine whether or not the projected revenue loss was measured up or not…when the data is collected, when the imperial analysis based on the data is done, as to how effective the measure has been, and that is why it would have been done on a 6-month basis because we recognise the new circumstances.” PM Mitchell explained.