Will the Road Use Levy fill the Pothole Problem?

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Would a Road Use Levy be Effective in Mitigating Barbados’ Pothole problem?

With all of the pothole controversy in Barbados, most people would know by now that annual road tax revenues do not go directly toward projects that positively impact our roads or transportation system. Rather, they are channelled to a consolidated fund to be divvied up and allocated to projects with competing priorities.  For many who pay several hundred dollars in road tax each year and have had to make further investments in auto-repairs due to the rapidly escalating pothole problem, this knowledge has been received like acid to an infected wound.

General Manager of C.O. Williams Construction Limited, Neil Weekes, recently argued that the road tax be abolished, suggesting instead that a road use levy be implemented at the gas pump as a percentage of a motorist’s fuel expense. This levy would be pooled into a road fund that would subsidize the $3 million dollars annual expense that the government spends on repairing potholes.

This proposition is not unique. Fuel taxes that are channelled directly into roadworks projects are indeed a global phenomenon. 26 US states have raised fuel taxes over the past four years for just this purpose. In November 2017, the state of California increased its fuel tax in an effort to raise around $5.4 billion annually, half of which will be used to improve highways, bridges and culverts, with the other half projected to go towards road repairs and improving public transit.

St. Lucia made a similar policy decision in 2017. The Allen-Chastanet administration argued that the fuel tax is expected to generate approximately $22 – $23 million dollars that will help to limit the number of loans taken to repair and rehabilitate roads.

Arguments on behalf of a fuel levy hold some degree of merit in that the proposed would eradicate the plethora of imperfections and inefficiencies in the road tax system. It would also ensure a high degree of transparency and predictability, given government’s ownership of Barbados National Terminal Company Limited— that is, the amount of revenues to be repatriated to the road fund by SOL, Rubis and ESSO would be directly correlated with BNTCL records of fuel sold.

The last and potentially most important positive outcome of such a levy would be in its potential to bring some degree of balance to the system— that is, those who drive more would pay more.

According to Mr. Weekes, “If you use the road more than me, you pay more than me because you use more fuel. Not like now where an old lady drives a thousand kilometres per year, pays the same amount of money as somebody that does 100 000 kilometres per year because there is a fixed amount based on your car and road tax.”

Despite its various merits, this suggestion is not likely to be received with a great deal of support.

For one, Bajan motorists were recently hit with a significant increase in the fuel excise tax of an extra 25 cents from 74 cents to 99 cents per litre for gasoline at the pump and an extra 24 cents per litre from 20 cents to 44 cents per litre for diesel, for purposes that have nothing to do with local roadworks.

If implemented, policymakers would have to decide whether the levy would be imposed in addition to the recently imposed tax or would the current tax revenues simply be rechanneled to the road fund? If the latter occurred, then this would result in a reduction in funds being used to help bring down the fiscal deficit (the current purpose of the fuel tax). These funds would have to come from elsewhere and could result in further taxation.

Another issue with Mr. Weekes’ pothole proposal lies in the fact that not all cars are created equal. Some vehicles are simply more fuel efficient than others; modern cars and trucks can drive for longer distances on less fuel and a small but growing number of vehicles don’t run on gasoline at all.

Perhaps it would be a better option to explore the imposition of an alternative road use fee in lieu of the current road tax or the proposed fuel tax.

 

Read more here at Construction Caribbean


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