Energy tax delay
Lithium-ion battery importer frustrated with GCT
IN the context of an energy crisis in which the rising costs of diesel and liquefied natural gas (LNG) have prompted an increase in electricity charges, CEO of Solarbuzz Jason Robinson is still agitating for the Government of Jamaica to reconsider applying General Consumption Tax (GCT) to lithium-ion batteries that store energy from solar photovoltaic systems.
In fact, Robinson, who is also vice-president of the Jamaica Renewable Energy Association, finds it counter-intuitive that Minister of Finance and the Public Service Dr Nigel Clarke has reduced duties on electric vehicles, but has reneged on its promise to remove GCT on a “solution” that will reduce Jamaica’s energy cost.
“So for a period of time last year, six months, lithium-ion batteries added 40 per cent, not just the 22 per cent GCT. Minister Vaz got the [CET] duty removed, but [GCT] was in the hands of the Ministry of Finance, which they promised last year that in five months, we would have had the GCT taken off as well,” he told Jamaica
Observer.
“We waited and waited and then in his budget speech Minister Clarke did not mention anything about removing GCT on lithium-ion batteries but he announced the lowering of duties on EVS, which really helps no one right now,” Robinson continued.
Although Dr Clarke did not indicate a provision for the GCT exemption in his first budget presentation in Parliament, he would later, on March 22, when closing the 2022/23 Budget Debate, announce that Cabinet had granted approval to do so.
While noting that the GCT exemption would be implemented during the first quarter of fiscal year 2022/23, which began on April 1, the finance minister explained that the move was in keeping with the thrust of the National Energy Policy.
“From as early as 2013, the MOFPS incentivised the use of selected energy-efficient technologies by suspending the Common External Tariff (CET) and granting GCT exemption on the importation of such items,” Dr Clarke said then.
“We recognise that lithium-ion batteries are rechargeable batteries that use lithium ions as the primary component of its electrolyte, commonly used for portable electronics and electric vehicles. Their popularity has been growing as an energy-storage technology, which should help to reduce the cost associated with the generation of electricity,” he added.
Still, the Solarbuzz CEO is not satisfied with the Government’s lack of urgency to eliminate the tax, considering the current environment in which Jamaica finds itself. In particular, he noted that both the novel coronavirus pandemic and the conflict between Russia and Ukraine have catalysed a spike in not only diesel prices, but also LNG – both of which Jamaica Public Service and independent power producers use to generate electricity.
Providing an estimated cost of lithium-ion batteries at US$4,000, he argues that adding GCT to this will make acquiring the product prohibitive for most people.
“So they’re forcing the low-income people who can’t afford lithium ion batteries, as it is, to pay an additional 15 to 22 per cent. So they’re keeping them out of the reach of a majority of Jamaicans, and they’re better technology and much cleaner technology,” Robinson emphasised.
“So why not do this in a timely manner, an emergency manner, when we’re in a crisis that’s not getting better and JPS bills are just going up? So we’re a little frustrated that it (GCT exemption) has not happened as yet,” he added.
Even more frustrating to Robinson is that, at present, the Government allows lead acid batteries, which only last four years and emits dangerous gases, to enter the island duty-free. By contrast, lithium-ion batteries last 15 years and are more environmentally-friendly.
On another note, he pointed out that the delay in removing the consumption tax on the batteries is costing solar energy companies because they have to weigh paying storage costs and other penalties while waiting for the GCT to be lifted. One player has not cleared products in the last eight weeks, Robinson revealed.
“[Removing] the GCT on lithium-ion batteries is a no-brainer, so what are they waiting for?…i don’t see why people should be suffering,” he told Business Observer.
When asked if people who consider installing solar PV systems have weighed the cost of lithium-ion batteries against the savings they would realise over the life of the product, he pointed out that it would be easier for businesses and business owners who can pay cash. However, the cost is still burdensome for those financing solar panel installations with loans.
“What we’re trying to do is work with banks and other financial institutions to get a better lending for the majority of the country and people want to have a more affordable loan payment per month. So the lower the system can be, the more cost-effective and the lower that monthly loan payment can be… closer to what they’re paying JPS or less,” he explained.