People are very sensitive to gasoline prices: Roger McKnight
A hypothetical Canada-wide gas tax holiday could cost an estimated $15.2 billion if all levels of government agreed to implement it for one year, according to a release from research firm Government Analytics Inc.
The $15.2-billion price tag would include pausing excise taxes and carbon pricing at the federal level as well as provincial and territorial taxes for one year.
Calls for a gas tax holiday in Canada have grown as fuel prices soared to record highs, though they have since pulled back. Notably, Ontario moved to cut its gas tax by 5.7 cents per litre and its fuel tax by 5.3 cents a litre for six months. U.S. President Joe Biden has also called for a temporary federal gas tax holiday in recent months.
Over half of Canadians surveyed in Volvo’s 2022 Mobility Trend Report said they were driving less because of the high cost of gasoline.
The Canadian Federation of Independent Business called on federal and provincial governments to pause or reduce fuel taxes. Ryan Mallough, the vice president of legislative affairs for Ontario at the Canadian Federation of Independent Business (CFIB), said a recent member survey found fuel prices were their number one concern.
“We understand that it would be expensive…but it is really being felt on the ground. It's being felt by small business owners. It's being felt by their staff. It's being felt by regular everyday Canadians and it is affecting their consumer choices,” Mallough said in a video interview.
A separate CFIB survey found 92 per cent of small businesses said they’ve raised prices in response to higher fuel and transportation costs.
“It really is one that's felt throughout the supply chain, and again, one that business owners across all sectors, across the country, all provinces, are really feeling the pinch on,” said Mallough.
Implementing a full-scale gas tax holiday would provide some relief, said Greg MacDougall, the co-founder of Government Analytics.
“It would help alleviate some of the pain that consumers will be feeling, but it seems to be more a political measure. You're dealing with surface issues. You're not getting at the root cause of issues,” said MacDougall in a video interview.
However, in practice, an all-encompassing gas tax holiday may lack the depth needed to tackle broader issues, he added.
Government Analytics used publicly-available figures from various sources and government agencies to estimate the total cost associated with a one-year gas tax holiday.
“It's difficult to identify exactly what the cost would be, but it's generally in the range that we identify,” said MacDougall.
Ontario’s decision to cut fuel taxes could cost the province an estimated $550 million, according to Government Analytics. The number was estimated using 2021 figures from Ontario’s Public Accounts 2020-21.
MacDougall said it is unclear if Ontario’s move will apply pressure on the federal government.
“It's very difficult to get provincial and federal governments to work in alignment on anything. Not all provincial governments are as healthy, or have come out of COVID with as much economic health, as Ontario has,” he said.
Meanwhile, Mallough said Ontario’s current gas tax cut is a step in the right direction, but will not provide enough relief to adequately address the issue.
“That's why we are calling on the federal government to do something on their end,” Mallough said.
The majority of taxes on gasoline come from the federal level, he said, including the federal excise tax and the carbon tax.
“There's a little more control on the federal side,” Mallough said.
Additionally, MacDougall noted that different provincial governments may have different priorities.
“Some of the provinces are still dealing very heavily with issues like aging populations. I think of New Brunswick, where the tax base is continuing to get smaller and smaller. Nova Scotia [also] has an aging population issue. They're trying to remedy it with immigration,” he said.
“There are a lot of other challenges the provinces have. It's a risk to sustainable economic development,” said MacDougall.
Despite any potential pressure Ontario’s tax cut may have on other provinces or the federal government, there is far less of a political imperative for Canada to adopt a gas tax holiday when compared to the U.S., according to Government Analytics.
“They have the primaries coming up. There is a whole big political apparatus in place to deal with what's going to happen with the American election in November,” he said.