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Squeeze the Tax out of Gas

Author: Victor Vrsnik 1999/05/19
Year after year motorists bemoan the high price of fuel. An attempted national boycott against gas retailers last month is the latest expression of this growing frustration. But the outcry against gas companies has shielded government from justifying its own consumer gouging.

Fuel taxes are among the highest taxes levied by federal and provincial governments. Originally, fuel taxes were implemented to help offset the costs of building and maintaining highway infrastructure. At the time there was a clear understanding that gas taxes were levied for road development, such as a revenue source for the Trans-Canada Highway.

Today fuel taxes are regarded as "sin taxes" like alcohol and tobacco taxes. Once fuel taxes became synonymous with "sin taxes," public and government perceptions about their use and intended purpose began to change. Now these taxes are an important source of general revenues.

More recently, Montreal, Vancouver and Victoria have begun levying taxes on gas purchased at local pumps. The result: gas taxes represent about 50% of the pump price.

For every litre of gas you buy, Ottawa walks away with 10 cents plus GST. The provinces take on average 13 cents per litre. But these are just the surtaxes.

The actual gas cost, excluding the federal and provincial taxes that are slapped on at the pumps, already has a whole battery of gas taxes built in, such as: royalty fees, corporate income taxes, business taxes, property taxes, etc. These taxes are also passed on to the consumer.

Meanwhile, Ottawa is making a killing. Of the estimated $5-billion in fuel taxes collected by the feds, a mere 5% finds its way back to our roads. In a sense, Ottawa has downloaded road renewal responsibility to the provinces without the wherewithal to finance it. In response, Manitoba spent about 75% of its gas tax and motor vehicle fee revenues on provincial roads.

In the past ten years, federal fuel taxes have increased by 33%, while Manitoba's fuel tax rates have jumped 43%. Meanwhile, governments across the country turn the spotlight on the oil companies to hide their own form of consumer gouging.

All levels of government have commissioned studies on fuel pricing. While these have focused on the petroleum industry, the studies have not adequately surveyed fuel taxation and its impact on pricing. Rather than focusing on tax burdens, committee after committee has singled out the petroleum refining and distribution industry on the presumption of alleged price fixing.

The time has come to blow the whistle on government gouging at the pumps. The Canadian Taxpayers Federation recently launched "Gas Tax Honesty Day" - a public awareness campaign that drives home two points - "The cost of gas is 50% tax," and "Gas taxes are a user fee; use it or lose it."

The campaign appeals to the court of public opinion to raise awareness, educate and advocate a lower overall tax burden for motorists.

The purpose of the campaign is not to defend the non-taxable pump price set by Canada's oil companies, but to re-focus and re-direct consumer frustration for high gas prices at Government.

A petition and a research report released for the campaign recommends that Ottawa dedicate gas taxes to rebuilding Canada's aging roads and cut the excess tax rate from the pump price. Motorists could well use the brake.

A Note for our Readers:

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Franco Terrezano
Federal Director at
Canadian Taxpayers
Federation

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