Soaring fuel prices will not swell government coffers, claims Department

·3 min read

Despite soaring prices, the King government says it will not reap a financial windfall from increased HST revenue charged on fuel products.

When pressed to supply data to support the claim, a spokesperson for the Department of Finance said exact figures will not be available until the fall fiscal update.

Between December 2021 and April 2022 the average price of unleaded fuel per litre increased from $1.34 to $1.71, according to Statistics Canada. It’s likely May’s average could jump to $2 or more.

When the cost of gas increases so does government’s share because HST is charged at 15 per cent on the total price including taxes and fees. The province gets 10 per cent and the federal government gets 5.

As a component of the total cost of a litre, HST has jumped from 14.7 cents the first week of June 2021 to 28.5 the same time this year.

“Consumption is the main indicator for fuel revenue, not price per litre,” a statement from the department said, explaining why increased provincial revenue from fuel is not expected overall.

A rough calculation by The Graphic estimates the province generated a couple of million more in HST on gas and diesel between January and March 2022 compared to 2021. HST charged per litre has continued to rise since.

But HST isn’t the only fee collected on gas. Fixed gas tax and carbon levies are also factored into the price seen at the pumps. These revenues decreased by a few million during the first three months of 2022 based on changes in consumption.

The province estimates the total amount of fuel sold will remain lower for the rest of the year, negatively impacting provincial revenue. The assumption is based on a belief fewer people will travel because of the high cost of fuel, which is also expected to impact discretionary income individuals have to pay for other goods and services which would usually lead to tax revenues.

Government’s forecast did not factor potential increases in traffic as pandemic restrictions ease and people are motivated to travel.

The carbon tax also increased May 9 from 6.6 to 11.05 cents per litre on gasoline and from 8.05 to 14.01 cents on diesel. There are no levies on furnace oil.

Opposition leader Peter Bevan-Baker says any increase in tax revenue pales in comparison to profits being made by oil companies.

He says there are ways the federal and provincial governments could buffer the impact, without decreasing tax revenue, especially on lower income Islanders who are struggling the most.

As an effect of an agreement between the previous MacLauchlan government and the federal government, a portion of funds from the federal-provincial carbon levy are used to reduce provincial gas tax collected at the pumps to the current 8.47 cents per litre for gas. Another portion is used to fund government green initiatives such as encouraging Islanders to buy solar panels, heat pumps or electric cars.

“Our party has always advocated that 100 per cent of that levy money should go directly to Islanders, and at the moment, that is not what’s happening,” Mr Bevan-Baker said.

He estimated if the carbon levy funds that offset provincial gas taxes were given to Islanders, the average household could receive at least $650 per year, on top of the green incentives already in place.

Because a direct transfer system is not in place, lower income Islanders, some of whom pay for gas and its associated taxes, receive the least benefit and relief.

Mr Bevan-Baker believes, it’s important to pressure the federal government to impose higher taxes on giant oil corporations.

“They should not be seeing major profit increases while Islanders struggle to pay to fill their car.”

Rachel Collier, Local Journalism Initiative Reporter, The Eastern Graphic

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