As far as Canadian politicians are concerned, the soaring cost of living is like winter slush, summer mosquitos and other unfortunate forces of nature. They would love to help, but what can they do?
Here’s an idea: our politicians just need to follow the lead of other countries and cut the stack of hidden taxes they charge at the gas pumps.
Canadian drivers pay six different taxes in some major cities. For example, Montreal drivers pay provincial and federal gas taxes, provincial and federal sales taxes, a transit tax and a carbon tax. Drivers in Vancouver, where taxes account for 38 per cent of the pump price, also pay six different taxes.
With taxes accounting for more than 55 cents per litre of gasoline on average, a family pays about $40 in taxes to fill their minivan. That’s a lot of money that could help pay for groceries or baseball cleats for the kids.
The federal government and some provinces charge sales tax on top of other taxes. That means politicians tax the fuel you need to drive, then they tax those taxes. This tax-on-tax adds more than four cents to the average pump price.
Provincial politicians can provide relief today by following Alberta’s example, which cut its 13 cent per litre fuel tax.
“While the inflation rate nationally rose in April, the rate declined in Alberta,” said University of Calgary economist Trevor Tombe. “Falling gasoline prices because of the tax holiday is the reason.”
The feds could immediately provide similar relief.
Conservative Party leadership candidate Pierre Poilievre’s proposal to scrap the carbon tax, and suspend the federal fuel and sales taxes on gasoline would save an Ontario family $20 every time they fill their minivan.
The big tax bill Canadians pay at the pumps is about to get worse.
The federal carbon tax has increased three times during the pandemic, and Prime Minister Justin Trudeau says he will keep cranking-up the carbon tax until it reaches nearly 40 cents per litre in 2030.
While the Trudeau government claims that “families are going to be better off” due to its carbon tax and rebate, the Parliamentary Budget Officer shows these politicians are using magic math. Even at the low end, including the rebate, the PBO’s analysis shows that Trudeau’s carbon tax will cost an average family $300 this year, rising to $1,145 in 2030.
The Trudeau government is also imposing a second carbon tax through fuel regulations that could add an extra 11 cents per litre of gas by 2030. But even that’s likely a low ball estimate of the true cost. British Columbia has a second carbon tax that currently costs about 17 cents per litre of gas, helping to make B.C. one of the least affordable places on the planet. And there’s no rebates coming with the second carbon tax.
While Ottawa sticks Canadians with higher tax bills, there’s a laundry list of other countries that are doing the right thing.
The United Kingdom announced $8 billion of fuel tax relief. South Korea cut its gas tax by 30 per cent. Germany is cutting taxes on motor fuels. The Netherlands cut its gas tax by 21 per cent. Italy, Ireland, Israel, India, Peru, Poland, 25 Indian states and union territories, Newfoundland and Labrador, New Jersey and Florida are also cutting gas taxes.
Other jurisdictions are cutting more than gas taxes.
Italy cut income and business taxes. Spain, France and Austria cut electricity taxes. Sri Lanka is cutting food and medicine taxes. Brazil and Colombia are cutting import taxes. Turkey is cutting taxes on food. South Africa cut business taxes. Croatia cut taxes on energy, sanitation products and food. Greece, Algeria and Albania have also announced tax relief.
Other countries are showing it’s possible to cut taxes to help ease the rising cost of living. There is no reason why our politicians can’t cut gas taxes to help Canadians afford their daily needs.
This column was first published in the Financial Post on June 7, 2022.