BRIDGETOWN, Barbados, Thursday July 6, 2017 – Barbadians considering the installation of solar water heaters and solar panels at their homes will have to fork out more as a result of the taxes announced in the May 30 Budget by Minister of Finance Chris Sinckler.
The cost of an average sized photovoltaic system for homes will also rise steeply, adding another BDS$2,000 (US$1,000) to householders’ bills, according to people involved in the renewable energy sector.
And some operators fear their businesses will not survive the ten per cent National Social Responsibility Levy (NSRL) which went into effect on July 1, and the two per cent tax on foreign exchange transactions, which takes effect on July 17.
Jerry Franklin, the managing director of Ensmart Inc, which describes itself as an innovative energy company specializing in areas such as solar photovoltaic systems, wind turbine, energy audits and power monitors, explained that such businesses simply could not afford to absorb the new taxes, therefore they had no choice but to pass the additional costs onto the consumer.
This, he said, would result in increases of between eight and 12 percent.
To put the impact of the increased taxes in perspective, Franklin explained that a transaction on imports that would normally cost him about BDS$43,000 (US$21,500) would jump to just over BDS$47,000 (US$23,500), and an average household solar photovoltaic system producing about three kilowatts of energy, that costs about BDS$18,000 (US$9,000) would increase to BDS$20,000 (US$10,000).
Water heater systems costing anywhere between BDS$2,900 (US$1,450) and BDS$5,000 (US$2,500) will now cost between BDS$300 (US$150) and BDS$600 (US$300) more.
Executive chairman of Caribbean LED Lighting Inc Jim Reid said that given the company imports “millions of dollars in components” each year, he would pay “a considerable amount” in taxes as a direct result of the NSRL and the foreign exchange tax.
Therefore, he said consumers should brace themselves for steep increases in the prices of energy efficiency products.
“We have looked at production cost where we can save money, where we can absorb and take in lesser margins and how we can minimize the impact on our customers as best we can. All I can estimate at this stage is that prices will rise from eight to ten per cent,” Reid said.
Disconcertingly, he said, similar products from Asia “where our competitors don’t have the manufacturing overheads, they don’t have the manufacturing costs and they don’t have all the manufacturing equipment” were likely to place the Barbadian companies at a distinct disadvantage.
“They have traditionally been cheaper than ours. Now with this extra NSRL we will be potentially even more expensive. So this is a real blow to manufacturing. It is a disincentive to manufacturing,” he said.
A glimmer of hope for Caribbean LED, a manufacturer of LED lights, is that about 70 per cent of its products are made for the export market.
Still, Reid said, his company would suffer a hit in any profit that it expected locally.
He also said taxes were not the answer to the country’s economic problems, as he assessed the impact of the NRSL, which climbed from two per cent to ten per cent on the customs value of all imports, with the exception of goods for the manufacturing, agriculture and tourism sectors.
“The taxes mean that we have become less competitive in our local market because prices will have to go up . . . .It pushes up the price of manufacturing and makes Barbados less competitive as a place to manufacture. So overall it is somewhat negative,” he said.
Meantime, industry commentator Hallam Hope said the taxes would not only result in an increase in the cost of living thereby limiting people’s ability to invest in the sector, but would also make companies less competitive.
He is predicting that the measures would result in “a small company coming and setting up a show window and bringing in very cheap products made in an Asian country that might not be the very best product.
“That has implications for jobs, for companies as to whether they can continue to exist. So overall it raises a number of cost implications for Barbadian companies particularly at a time when you really need investment because we don’t know how long oil prices are going to remain where they are,” Hope said. (Barbados Today)