As fuel prices reach record highs and fuel inflation, governments are increasingly being called upon to temporarily suspend or reduce gasoline taxes.
On Monday, US President Joe Biden said he was considering such a “gas tax” and could make a decision as early as this week. Asked about the idea at a press conference in Toronto, Finance Minister and Deputy Prime Minister Chrystia Freeland touted existing measures to make life more affordable for Canadians.
“Our pollution award includes an element where we return the money to Canadian families, and the amount returned to Canadian families has increased this year,” Freeland told reporters Monday. “That said, we are not closing any doors and we will be monitoring the affordability issues facing Canadian families very closely and we stand ready to do more, if necessary.”
Philippe Cyrenne, an economics professor at the University of Winnipeg, says the federal government could easily do more by instituting a gas tax exemption, which would save Canadians about 10 cents a litre.
“A 10 cents per liter gas tax cut would save Canadians money,” Cyrenne told CTVNews.ca. the federal gasoline tax would flow to consumers in the form of lower retail prices. »
Since 1995, the federal government has imposed an excise tax of 10 cents per liter on gasoline. Provinces also levy taxes on fuel, which vary widely across the countryfrom 6.2 cents per liter in the Yukon to 14 cents or more in Manitoba (14.0 cents), British Columbia (14.5), Ontario (14.7), Saskatchewan (15.0), Nova Scotia (15.5) and Quebec (19.2).
If you fill up in Vancouver, Victoria or Montreal, these cities charge additional gas taxes. Federal and provincial sales taxes and carbon levies also apply. Natural Resources Canada has published a online chart that breaks it all down.
Federal Conservatives have called for temporary tax relief at the pumps. A handful of provincial governments have already taken action.
Alberta suspended its 13-cent gas tax in March and plans to evaluate the decision quarterly. Newfoundland and Labrador temporarily reduced its gas tax from 7 cents to 7.5 cents per liter earlier in June. July 1, Provincial gas tax rates in Ontario will be lowered to 9.0 cents per litre, down from 14.7 cents; a reduction of 5.7 cents which will remain in place until December 31.
The US states of Maryland, Georgia, Connecticut, New York and Florida have all taken similar action. Just like the UK, Italy and Germany. The economic fallout from Russia’s invasion of Ukraine has driven up gas prices around the world. If the Biden administration goes ahead and cuts federal gasoline taxes, Canada will be the only G7 country that hasn’t lowered gasoline taxes or offered a subsidy to offset recent difficulties in the pump.
“Consumers are really hurting from rising gas prices,” US Treasury Secretary Janet Yellen said alongside Freeland at the Toronto news conference on Monday. “I think while it’s not perfect, it’s something that should be seen as a policy to address it.”
Scotiabank Chief Economist Jean-Francois Perrault agrees.
“You lower gas prices, you lower inflation,” Perrault told CTV News Channel’s Power Play on Monday. “It’s a temporary impact, obviously… But certainly, if you’re helping Canadians deal with higher inflation, one way to do that is to reduce gasoline taxes.”
That should focus on the federal carbon tax, said Cyrenne of the University of Winnipeg.
“I think it would be appropriate to suspend or even reduce the proposed carbon tax increases until oil and therefore gas prices moderate,” Cyrenne explained. “The higher prices are enough to reduce the amount of fossil fuels demanded, which was the purpose of the carbon tax.”
Trevor Tombe, an economics professor at the University of Calgary, agrees that a gas tax exemption would save Canadians money and help fight inflation, but still advises against such a decision.
“Gasoline prices provide an important signal to consumers to try to reduce demand for gasoline,” Tombe told CTVNews.ca. “It’s also a very costly policy for the government in terms of lost revenue. The tax brings in the federal government about half a billion dollars a month.”
Tombe adds that it wouldn’t help all families in need of support either.
“Instead, the government can provide targeted assistance to low- and middle-income families who may be struggling with rising prices, no matter how far they drive,” Tombe said.
Most of the gas tax money in the United States goes to road infrastructure; in Canada, it is general tax revenue. Although gasoline taxes are lower in the United States than in Canada, both are already among the lowest in the developed world.
On Tuesday, Natural Resources Minister Jonathan Wilkinson said the federal government was more focused on lowering gasoline prices in other ways.
“I think Minister Freeland was pretty clear in her speech earlier this week that we’re working on affordability,” Wilkinson told reporters in Ottawa. “But obviously we’re also working to stabilize global energy prices through the work we’re doing to increase production.”
With files from The Canadian Press
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