March 2, 2008

Renewable energy devices to be tax deducted ... not enough

It's still cooking, but it's not clear what lies under " energy conservation and renewable energy", maybe in the future we will get similar deductions on the environmental green products, recycled products, etc?

This is a good step because when you reduce taxes on the imported parts you will improve the competitive advantage of the local prodcuts. Since we don't manufacture renewable energy parts, but, we use them in production. We will get a competitive products manufactured locally.

But, this business strategy lies for all manufacturing products. The government need to support all the manufacturing industry by exempting all the manufacturing imports from taxes to protect our local businesses and products. Many world wide companies impose these protections by adding tarrifs on foreign products to support the local businesses. Hence, we produce more!

USA, and Eu does that even the WTO don't allow this to happen, but it's debatable.

AMMAN (JT) - Despite frequent calls to exempt renewable energy devices from sales tax and customs, citizens are still forced to pay over 40 per cent extra for the devices, according to sources familiar with the issue.

But a concerned official said the decision is imminent.

Earlier in January, Prime Minister Nader Dahabi said the government was looking into a decision to exempt energy conservation and renewable energy devices from customs duties and sales tax.

In December, His Majesty King Abdullah stressed the importance of increasing reliance on alternative and renewable energy sources, noting that privileges and exemptions should be given to institutions and entities that apply energy renewable and conservation systems.

The call comes in line with the Kingdom’s energy strategy, which seeks to increase dependence on local energy sources, from the current 4 per cent to 25 per cent by 2015, and up to 39 per cent by 2020.

Yet with rising energy prices driving up the cost of living, the decision has yet to be made, leaving citizens looking to move towards energy-saving devices with little options.

The wider use of solar energy and other energy saving devices have the potential to save the Kingdom’s energy consumption by 25-50 per cent, according to National Energy Research Centre (NERC) President Malek Kabariti.

But the NERC president said certain parties are resistant to the exemption move, unwilling to forego the revenue generated by those taxes and tariffs.

“A certain red tape mentality is holding back the decision. Concerned authorities need to realise that the decision will save the government more money than what it gains from customs,” he stressed.

“At the end of the day, we will pay less for energy, which benefits everyone,” he noted.

Ziad Jibril, head of the ministry’s Renewable Energy Directorate, stressed that the exemption procedure was on its way.

According to Jibril, the subcommittee examining the proposal, which comprises representatives from the ministries of energy and natural resources, finance, environment and other stakeholders, is close to finalising the decision, which will now exempt renewable energy systems and plants from sales tax.

Once finalised, the move will be presented to the Royal committee tasked with modernising the sector and then to the Cabinet for endorsement. The exemption is expected to include the manufacturing parts which the solar industry and the renewable energy industry needs.

Under the awaited measure, standards on market and imports will be changed to ensure that only high quality products proved to be energy-saving benefit from the decision. Along with the energy draft law, the move would also encourage manufacturers and retailers to use locally produced items.

The draft law, which includes regulations governing the renewable energy sector standards, is expected to be presented to the Cabinet soon.

Despite the push for locally produced items, the latest advances in solar energy, particularly the “evacuated tube” technology, however, cannot be manufactured locally, according to Ayman Maaitah, solar energy specialist and CEO of Millennium Energy Industries.

“This technology needs mass production which Jordanian market cannot absorb. Therefore the new technologies must be imported,” he said, noting that unless the imports are lowered, the technology would not be accessible to a large portion of the population.

The technology is currently subject to 16 per cent sales tax and 23 per cent customs, which, according to Maaitah, passes a 40 per cent price increase on to consumers.

The savings from an exemption decision would be dramatic for solar water heaters, which industry experts say can provide users with free heating two years after purchase.

A solar generated water heater currently lists around JD500. If the device was exempted from tariffs and sales tax, however, it will cost citizens around JD350, Maatiah noted.

Using solar energy to heat a home currently costs JD10-15 per square metre. If exempted from taxes and tariffs, the cost drop by 20 per cent, he added.

If the exemption decision is not taken, it would be an equally negative effect on the sector, according to Maaitah

In an effort to save money and take part in the Kingdom’s move to energy conservation, consumers would be forced to purchase cheaper and lower quality energy saving devices, he said.

“With no specifications or quality regulations, substandard products will flood the market and people will turn their backs on solar energy. This is the greatest threat to the industry,” he pointed out.


Anonymous said...

being in the solar powered and energy conservation lighting business, I have to comment here that the legislation was passed, but was unfortunately incomplete.

While some products like LED lights were exempted from taxes and customs, items like solar powered lighting (which incidentally incorporate LED lights) are exempted from customs but NOT sales tax!!! which is quite ridiculous!

You can check the customs directory for details. I thought I'd point it out.

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