FINANCE Minister Colm Imbert said increases in fuel prices had a small effect on inflation, compared to the increased fares provided by some transport providers. He made this statement in response to a question from Naparima MP Rodney Charles in the House of Representatives on Wednesday.
In its monetary policy report last month, the Central Bank said the most significant impact on core inflation is anticipated to come from the pass-through of higher fuel prices to the transport sub-index.
"The capping of the fuel subsidy is expected to have a notable impact on headline inflation should higher fuel prices result in broad-based increases in maxi and taxi fares. Inflationary pressures are anticipated to persist into 2023 but remain relatively contained."
When he presented the 2022/2023 budget in the House on September 26, Imbert announced an increase in the price of super and premium gasoline by $1 and diesel 50 cents a litre.
The new prices for fuel are now $7.75 a litre for premium gasoline, $6.97 a litre for super gasoline, and $4.41 a litre for diesel. Before the budget, the prices for premium gasoline, super gasoline and diesel were $5.75, $4.97 and $3.41 per litre respectively.
At that time, Imbert said Government believed it was reasonable to cap the money to be spent on subsidising fuel at $1 billion per year, to provide money to spend in other parts of the economy.
Imbert described Charles' claim that the increase in fuel prices caused an increase in inflation as typical of the the UNC's inability to understand how anything works.
"Do no research, do not read, do not bother understand anything, check nothing, misinterpret, misstate and also make statements that make no sense."
Imbert said, "The actual increase had a very small effect on the inflation number but subsequent increases in taxi fares and transport rates is what caused the problem."
This was something that has happened in TT when fuel prices have increased in the past.
While fuel prices may increase by ten cents, Imbert said, taxi fare rates may increase by $1, $5 or $10 in some cases.
He described those increases in one way.
"It was a case of price gouging"
Imbert reminded MPs that this year, the fuel subsidy liability for Government was approximately $2 billion.
"In 2023, it could be $1 billion or more.
He estimated that the value added tax (VAT) collected from the sale of fuel is less than $200 million.
Imbert also reminded MPs that the fuel subsidy is taxpayers' money.
He said this meant "you're taking (money) from one pocket to put in another pocket."
Against this background, Imbert said Charles' request for VAT to be removed from the sale of fuel cannot be entertained.
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