How much pain will politicians let people feel before they finally reduce fuel taxes?
From the sky-high cost of oil to the war in Ukraine, there are many factors making it more expensive for families to head to the cottage or take a road trip this summer. But Prime Minister Justin Trudeau and Premier François Legault could provide relief today by reducing the big tax bill at the pumps.
With federal and provincial fuel excise and sales taxes, along with a carbon and a transit tax, drivers pay six different taxes every time they fuel up in Montreal. These taxes add about 65 cents per litre of gasoline to the pump price, or nearly an extra $50 every time a family fuels up their minivan.
The federal government is also planning to impose a second carbon tax through fuel regulations in 2023. It will add up to 13 cents per litre to the price of gas by 2030, according to analysis by Environment Canada.
Bottom line: politicians could immediately save drivers a lot of money by reducing their tax take at the pumps. That’s what politicians around the world are doing.
The United States’ President Joe Biden understands families need relief and is pushing Congress and state governments to suspend fuel taxes.
“With the tax revenues up this year and our deficit down over $1.6 trillion this year alone, we will still be able to fix our highways and bring down prices of gas,” said Biden. “By suspending the 18 cents (per gallon) federal gas tax for the next 90 days, we can bring down the price of gas and give families just a little bit of relief.”
With an extra $30 billion in revenue falling into Ottawa’s lap this year, at the very least, Trudeau could immediately follow Biden’s lead and provide tax relief at the pumps. The European Parliament is poised to mirror Biden.
“Europe can no longer afford this inaction, especially in view of the recent proposals of the Biden administration on the other side of the Atlantic,” said Manfred Weber who is the chairman of the political party with the most seats in the European Parliament. “The EU should therefore follow the U.S. example and provide some direct relief to European citizens through a similar holiday on fuel taxes.”
Many countries have already cut fuel taxes to ease the pain of inflation.
The United Kingdom announced billions of dollars of fuel tax relief. South Korea cut its gas tax by 30 per cent. Germany cut its fuel tax by more than 30 cents per litre of gas for three months. The Netherlands cut its gas tax by 17 cents per litre.
“I’ve now used and put in place all of the tax measures that I can,” said Ireland’s Finance Minister Paschal Donohoe after cutting the excise fuel tax and the value added (sales) tax on electricity.
India cut its gas tax to “keep inflation low, thus helping the poor and middle classes.”
Cutting gas taxes could help settle skyrocketing inflation rates.
“While the inflation rate nationally rose in April, the rate declined in Alberta,” said University of Calgary economist Trevor Tombe in May. “Falling gasoline prices because of the tax holiday is the reason.”
Today, Trudeau and Legault could help make life more affordable for drivers who are struggling to fuel up their cars on the way to work. It’s time for our politicians to stop playing the waiting game and provide tax relief at the pumps like so many other world leaders.
This column was originally published in the Montreal Gazette on July 14, 2022.