The Independent Consumer and Competition Commission (ICCC) is worried about the Climate Change and Development Authority's (CCDA) proposed new carbon levies or extra excise duties.
The ICCC expressed its reservations in a recent media release, stating that there has been a lack of substantive meetings with the impacted sectors on the issue, as well as the procedural mechanism used to enact these new levies and its negative effect on PNG users and companies.
These carbon levies were first gazetted by the Ministry of Finance in National Gazette No. G304 on May 27, 2020, and then updated in National Gazette No. G673 on October 12, 2020, resulting in a rise in excise tariffs, according to ICCC Commissioner and Chief Executive Officer Paulus Ain.
The ICCC decided not to incorporate the extra excise duties in the pump prices for gasoline, diesel, and kerosene after the new levies were gazetted, according to Commissioner Ain, so any alteration to the Excise Tariff Act should be introduced by the Department of Treasury and passed by Parliament.
He also stated that the Department of Treasury recommended in October 2020 that the carbon levies or extra excise not be imposed until the effect on enterprises and customers is completely evaluated.
“Despite the advice from Treasury, who is responsible for tax policy matters, the CCDA has proceeded to implement the carbon levies or additional excise tariffs, as per G673, on 12th April 2020,” Mr Ain said.
“Despite the important role the ICCC undertakes in the pricing the refined petroleum products at the retail level, the ICCC found out about this latest development when it was brought to our attention by a concerned stakeholder.”
He said, “Treasury and ICCC were not copied on recent correspondences in relation to this matter when CCDA informed the industry of their intention to commence collecting these new levies or additional excise duties.”
At a moment when the economy and companies are still suffering from the global and national impacts of COVID-19, the ICCC is very worried about the influence of these carbon levies and fees on the petroleum, airline, and agriculture sectors, as well as customers.
Ain said, “Based on the actual volume of fuel products used in the country in 2020, the ICCC has estimated that from 2021 onwards, consumers and businesses in PNG will incur an additional fuel cost of about K12 million annually.”
“This additional estimated cost to the economy will increase once the economy recovers and more fuel is consumed in the market, or when CCDA further increases the carbon levies in the future.”
Despite the CCDA and the Department of Finance's plan to raise the latest levies in April 2020, according to National Gazette No. G673 of 2020, Puma Energy PNG Refining Limited started collecting them in November 2020.
“The CCDA needs to clarify what it is going to do about the levies Puma Energy has been collecting from consumers since November 2020,” Ain said.
The ICCC is mandated by the Prices Regulation Act to incorporate all valid market costs in controlled prices.
Given the legal concerns and Treasury's recommendation to postpone the introduction of the new levies before the matter is fully discussed on a policy level, ICCC is urging CCDA to postpone the implementation of the new levies until Treasury receives its input on the matter and appropriate procedures are followed to amend the Excise Tariff Act if required.
This is because the new excise duties on processed fuel goods are designed to reduce emissions in the atmosphere.
To avoid imposing redundant fees and charges on companies in the region, any carbon levies or additional excise duty on refined fuel goods should be viewed holistically by Treasury.
According to Ain, the ICCC has decided to exempt these levies from the prices of refined petroleum products while waiting for more information from Treasury.
