IAEEL newsletter 2/98

A Case for Lower Taxes

Transport costs add about 10% to the price of PV lanterns for the rural end user; import duties and VAT add another 20-30%, and margins an additional 30-40%. As a result, many potential customers cannot afford to purchase lanterns. Reducing or eliminating duties and taxes would help in generating higher sales, further reducing the need for high margins.

A strong argument can be made for removing duties and taxes:

Total tax revenues are likely to be small. Assuming a market of 50 000 kits per year at $65 CIF [cost, insurance and freight] per lantern and a 30% combined duty & VAT regime, the treasury would not even gain $1 million.

Subsidies flowing to rural electrification programs are likely much higher than potential tax revenue from solar lanterns.

Most likely, more rural people would benefit from solar lanterns than from rural electrification programs.

Solar lanterns appear to be the least expensive way to provide rural households with modern lighting services.

In fact, many countries have abolished duties and taxes on conventional electricity generating equipment but still levy such surcharges on solar equipment because they are considered luxury items. There is a need to level the playing field so that solar energy and other alternative lighting sources can compete on equal terms with conventional sources based strictly on their respective merits.

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