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Ten years of gas tax dishonesty

By Adam Taylor
web posted May 19, 2008

With gasoline prices now at record levels across Canada, motorists are rightfully outraged when they hear about the record profits of oil companies. But as the summer driving season gets underway and the pain felt at the pumps intensifies, save some of that anger for Big Government.

On May 14, the Canadian Taxpayers Federation (CTF) held its 10th annual Gas Tax Honesty Day. The yearly campaign kicks-off the summer travel season for Canadian motorists and is a reminder of the high tax component hidden in the price of gasoline.

Over the past 12 months -- the period of May 2007 to April 2008 -- the average national price of a litre of gasoline paid by Canadian motorists was approximately $1.16. This represents a 17-cent increase over last year's average price. Gas taxes account for an average 28% of the pump price.

As prices soar, Ottawa should be taken to task for three reasons. First, GST is charged on the total pump price, including all federal and provincial taxes. It is a tax on tax. It is one thing for government to tax a good or a service but quite another to tax a tax. This practice should end.

Second, motorists continue to pay a 1.5 cent per litre deficit elimination tax that was imposed in 1995. Newsflash: the federal deficit was vanquished in fiscal 1997-98. Since the books were first balanced a decade ago, Ottawa has racked up over $100-billion in surpluses yet motorists are still paying the deficit elimination tax. This tax measure has pumped an extra $6-billion into federal coffers over the same period. This is money that should have remained in the pockets of over-taxed Canadians.

Third, the federal government benefits from higher gas prices. Every ten cent increase in the price of gasoline pumps an extra $100-million into government coffers. With Canadians increasingly running on empty trying to fill their tanks it is maddening government is getting richer. How much more does the government need?

Already, Ottawa will collect $5-billion in gas and diesel taxes and another $1-billion from the GST this year. The good news is that next year half of that money will be spent on roads, highways and bridges -- a spending initiative the CTF has called for since 2002. This is a partial victory for taxpayers but to complete it gas taxes need to be lower. Will the Conservative government keep promises made in opposition to lower gas taxes?

In August 2005, then-Opposition leader Stephen Harper blasted the Liberal government for refusing to reduce gas taxes as prices soared. "There's no reason for the federal government to profiteer when consumers are hurting," he said, urging the former government to give motorists a break by cutting gas taxes. "This is causing considerable dislocation. There are a lot of people on fixed incomes. There are a lot of businesses on thin margins that are going to be affected by this."

Yet, after three Conservative budgets, families, small business owners, and those on fixed incomes are still being hosed at the pumps by the government and the dislocation continues at a time when Canadian family budgets are being squeezed.

Perhaps the only saving grace for Mr. Harper and his Conservatives is the Liberal Opposition keeps hinting at jacking up energy taxes even further with the implementation of a carbon tax. Maybe Mr. Dion needs to fill his government car up with his own money to get a dose of reality.

Politicians point to the price of oil and the huge profits being recorded by oil companies as the real culprit behind skyrocketing gas prices. This is a convenient way to deflect attention from unfair and dishonest taxes, which is the one thing they can control. It's time motorists are given a break. The quickest way for that to happen is for Ottawa to cut its gas tax bite. ESR

Adam Taylor is national research director of the Canadian Taxpayers Federation.


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