Will British Columbia’s gas tax cut lead to lower fuel costs for drivers?

Experts are divided on whether a tax cut would save drivers money or end up boosting profits for oil companies.

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The British Columbia government is under increasing pressure to follow Alberta’s lead and temporarily cut gasoline taxes to ease the pain at the pump.

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Experts are divided on whether a tax cut would actually save drivers money or just end up boosting profits for oil companies.

Gasoline prices remained at record highs of $2.23 a liter at some stations in Metro Vancouver on Tuesday, with higher prices expected this summer.

And BC Liberals are calling on New Democrats to temporarily suspend provincial gas taxes and give taxpayers a one-time boost through the Climate Action Tax Credit and suspend taxes at import on fuel from Alberta.

In Vancouver, drivers pay 56 cents per liter in taxes while drivers in Victoria pay 47 cents per litre, according to the BC Utilities Commission. Drivers in the rest of British Columbia pay 43 cents in taxes per liter of gasoline.

This can be broken down into 11 cents per liter carbon tax, 10 cents per liter federal excise tax, 8.5 cents per liter provincial excise tax and 9.5 cents per liter GST. The public transit tax varies by jurisdiction, but is highest in Metro Vancouver at 18.5 cents per litre.

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Asked during Question Period, Deputy Premier Mike Farnworth said: “Cutting gas taxes just for the sake of cutting gas taxes doesn’t guarantee the money is going back into people’s pockets. . More often than not, it is taken up by the gas companies which drive up the prices. »

Farnworth said events beyond the government’s control — namely the war in Ukraine and oil sanctions against Russia — are to blame for the price spike.

However, Liberal MP Peter Milobar pointed the finger at Alberta, which temporarily stopped collecting its provincial gasoline tax of 13 cents per liter to relieve Albertans. Gasoline prices in Alberta are about 60 cents per liter lower than those in British Columbia

Gas tax relief in Alberta is costing Premier Jason Kenney’s government $100 million a month.

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Gasoline prices hit 222.9 c/litre in Coquitlam, British Columbia on May 8, 2022. Photo by NICK PROCAYLO /PNG

Energy expert Werner Antweiler, an associate professor at UBC’s Sauder School of Business, is skeptical whether a temporary gas tax cut would actually save drivers money. British Columbia, as British Columbia’s gasoline prices cannot be compared to Alberta’s, as the oil-rich province has a higher number of oil. producers and more supply.

Compared to Alberta, British Columbia has a smaller, more concentrated market of oil producers and less supply, Antweiler said, which creates an increased likelihood that any tax savings will be absorbed by oil companies.

“If (the government) were to reduce the price of fuel by 10 cents a liter under a tax cut…that means there’s a big chunk that will go to producers just because they can,” did he declare. “Supply must equal demand and if people are willing to pay a certain price for the product, producers can charge that price.”

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Antweiler said the province should let fuel supply and demand balance out and provide relief to low- and middle-income British Columbians in the form of rebates, he said.

ICBC customers will get a one-time $110 discount to offset the price spike, but critics say that barely pays for a fill-up at the pump.

Milobar said the NDP should increase the rebate that low- and middle-income B.C. taxpayers receive from the B.C. Climate Action Tax Credit, which helps offset the impact of taxes on carbon and is paid in January, April, July and October.

Trevor Tombe, an economics professor at the University of Calgary, said his analysis suggests the gas tax cut would benefit consumers because retail gas stations would have a strong incentive to lower prices to attract customers. The tax cut would give petrol stations the chance to lower prices, he said.

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Tombe’s research found that in Alberta, 90% of the tax relief was passed on to drivers.

He challenged Antweiler’s logic that the level of domestic production determines how much of a tax cut is passed on to consumers.

“It’s silly for politicians to take a position that a tax cut wouldn’t affect prices, given that Alberta demonstrates that,” Tombe said. “I think it’s unfortunate … that the debate is about whether or not tax changes affect prices. I think it’s clear that they definitely do.

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  1. Bruce Ralston, Minister of Energy, Mines and Low Carbon Innovation.

    Low-carbon fuel to reduce emissions, but could make fuel more expensive in British Columbia

  2. How much do you spend on gasoline for your daily trips?

    Fuel calculator: how much do you spend on fuel each day?


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Julio V. Miller