Will cutting B.C.'s gas tax lead to lower fuel costs for drivers?
The B.C. government is under increasing pressure to follow Alberta's lead and temporarily slash gas taxes to ease the pain at the pump.
Gas prices on Tuesday remained at record levels of $2.23 per litre at some stations in Metro Vancouver with higher prices expected this summer.
And the B.C. Liberals are calling on the New Democrats to temporarily suspend provincial gas taxes and give taxpayers a one-time boost from the Climate Action Tax Credit and suspend import taxes on fuel from Alberta.
In Vancouver, drivers pay 56 cents per litre in taxes while drivers in Victoria pay 47 cents per litre, according to the B.C. Utilities Commission. Drivers in the rest of B.C. pay 43 cents in taxes per litre of gasoline.
When pressed in question period, deputy premier Mike Farnworth said “cutting gas taxes for the sake of cutting gas taxes does not guarantee that money goes back into people's pockets. More often than not, it is taken up by the gas companies that jack the price up.”
Farnworth said events beyond government's control — namely the war in Ukraine and oil sanctions against Russia — are to blame for skyrocketing prices.
However, Liberal MLA Peter Milobar pointed to Alberta, which temporarily stopped collecting its 13-centa-litre provincial gas tax to give Albertans relief. Gas prices in Alberta are about 60 cents a litre lower than B.C.
Alberta's gas tax break is costing Premier Jason Kenney's government $100 million a month.
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 B.C. drivers money because B.C. gas prices cannot be compared to Alberta as the oil-rich province has a higher number of oil producers and more supply.
Compared to Alberta, B.C. has a smaller, concentrated market of oil producers and less supply, Antweiler said, which creates an increased likelihood that any tax savings are absorbed by oil companies.
“If (the government) were to reduce the fuel price by 10 cents a litre by virtue of a tax cut ... it will mean there's a significant chunk that will go to the producers simply because they can,” he said. “Supply has to equal demand and if people are willing to pay a certain price for the product, and then the producers can charge that price.”
Antweiler said the province should let fuel supply and demand balance out and give relief to low- and middle-income British Columbians in the form of rebates, he said.
ICBC customers will get a one-time $110 rebate to offset soaring prices but critics say that barely pays for one fill-up at the pump.
Milobar said the NPD should bump up the rebate lower- and middle-income B.C. taxpayers receive from the B.C. Climate Action tax credit that helps offset the impact of the carbon taxes and is paid out in January, April, July and October.
University of Calgary economics professor Trevor Tombe said his analysis suggests chopping the gas tax would benefit consumers because retail gas stations would have a strong incentive to lower prices to attract consumers. The tax cut would give gas stations the flexibility to lower prices, he said.
“It's silly for politicians to take a position that a tax reduction wouldn't affect prices, given that Alberta demonstrates it does,” Tombe said