Ottawa leaves door open for provinces to cut fuel taxes

The federal Liberals are leaving the door open for the provinces to chop their gas taxes with out concern of Ottawa neutralizing that discount with a better federal gas cost below carbon pricing.

Beforehand, the Liberal authorities had been dropping not-so-subtle hints that provincial gas tax cuts had been a no-no. A extra stringent benchmark system for federal carbon pricing comes into impact subsequent yr. And final July, Saskatchewan’s proposal to introduce its personal model of Ottawa’s carbon tax was turned down.

Ostensibly, that was due to timing points; the Liberal authorities mentioned it wished to attend till a evaluation of carbon pricing guidelines was full. However Saskatchewan Premier Scott Moe had a a lot totally different take: The Liberals didn’t like his province’s proposal to chop gas taxes to offset carbon pricing.

There was ample precedent for Saskatchewan’s proposal: Newfoundland and Labrador, New Brunswick and Prince Edward Island have, to various levels, been allowed to chop taxes or in any other case exempt their residents from the chew of the federal gas cost. One distinction: These reductions got here years in the past, when the Liberals had been attempting to assemble a vital mass of help for his or her nationwide carbon pricing technique.

As just lately as the primary week of April, Atmosphere and Local weather Change Minister Steven Guilbeault identified the plain: Cuts to provincial gas excise taxes act in the wrong way of the federal gas cost, which presently sits at 11.05 cents a litre.

These cuts “go towards our efforts to combat local weather change,” Mr. Guilbeault mentioned throughout an interview on PrimeTime Politics on CPAC. The minister mentioned he wished the provinces had been taking different steps to assist Canadians address inflation, with out undermining that combat. “They’re simply going for the simple resolution, and doubtless one that’s brief time period, by way of political recognition.”

However that want is not going to translate into motion. In a press release, Mr. Guilbeault’s division mentioned carbon pricing guidelines don’t prolong to “non-carbon value associated taxation regimes,” and modifications for “different functions” aren’t thought of when figuring out whether or not a province is adhering to the federal benchmark.

The wording of the benchmark coverage employs equally murky logic: Provinces should not undermine the value sign inherent within the federal gas cost by way of prompt rebates or “explicitly” decreasing their gas taxes.

In different phrases, a province can do no matter it likes with gas taxes, as long as it doesn’t come proper out and say it’s decreasing these taxes to blunt the affect of the federal gas cost.

However there are a few issues with that coverage. The obvious is that Mr. Guilbeault is completely right – it’s the web improve in taxes that matter. If the provinces offset the federal gas cost, it’s rendered impotent.

Even when one accepts the illogical framing of the benchmark coverage, there’s nonetheless an issue, particularly that Alberta and Ontario have each tied their cuts to gas taxes to the federal carbon levy. Alberta Premier Jason Kenney may hardly have been clearer; he referred to as his province’s non permanent suspension of its 13-cent-a-litre gas levy “the reverse carbon tax.”

What may probably be extra specific than that?

Ontario Premier Doug Ford was barely extra circumspect, however however he had referred to as for Ottawa to chop its carbon cost within the weeks earlier than he introduced a brief discount of 5.7 cents a litre in his province’s gas tax.

When you’re searching for clues as to why Ottawa is ignoring such provocations, look no additional than Newfoundland. That province reduce its gas tax by 7 cents a litre in late Could, about six weeks after Mr. Guibeault’s criticism of such measures by conservative governments in Alberta and Ontario.

Newfoundland Premier Andrew Furey, a Liberal, instructed reporters he would have achieved so earlier – however Ottawa’s guidelines on carbon pricing would have meant that the federal authorities would have imposed an extra levy to offset any reduce.

Nonetheless, the Premier mentioned, he mentioned the matter with Prime Minister Justin Trudeau in mid-Could, clearing the best way for Newfoundland to chop its gas tax. Fortunately for Newfoundland, the trail was cleared to chop its tax – now, residents of that province pay 2.2 cents a litre much less in taxes than they did earlier than carbon pricing was put in place in 2019. Even Alberta’s full suspension of its gas tax doesn’t reduce fairly as deep.

That forbearance for Newfoundland’s Liberal authorities continues a sample of Ottawa chopping a good quantity of slack for the Atlantic provinces by permitting for exemptions to carbon pricing.

These exemptions flatly contradicted Ottawa’s declare that it has set a nationwide value on carbon, lengthy earlier than Alberta and Ontario started to chop taxes on the pump.

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