How the government can save money by scrapping a $9-a-day petrol tax
Ottawa is trying to save money on a new petrol tax, with the federal government announcing Friday that it is dropping the surcharge from the $10.10-a.b. rate to the $7.70-a.-b.
But the changes are likely to face opposition from the provinces, which will continue to pay the $9.30-a-.b. price tag.
Ottawa’s announcement comes after it was revealed that the provincial government will pay for the tax-free portion of the new rate, which is a savings of $500 million per year.
The federal government said it would save $1.3 billion in 2017-18, with another $600 million expected in 2018-19.
The government said the federal tax is “the only cost-effective way to ensure all Canadians benefit from our shared economy.”
The federal levy on gasoline has been in place since January 1, and Ottawa has been pushing to get it removed, with Finance Minister Bill Morneau announcing earlier this year that he was ready to roll it back to its original form.
“It’s the only way to get the gas tax to work properly, and that’s why we’re bringing forward a plan to end the tax,” Morneau said in November.
Ottawa also announced last week that it will phase out the federal excise tax on diesel fuel starting in 2018, a move that could save the government $600-million per year by 2019-20.
The changes come at a time when the economy is in a recovery, with employment soaring and the unemployment rate dropping to 5.7 per cent.
The Liberal government, which also introduced a tax break for new homebuyers in 2017, also wants to phase out a number of taxes, including the PST, which it says is hurting the economy.
The Liberals announced the changes last month.
“The PST will be phased out in 2018 and 2019, but we will continue taxing new home purchases to help grow our economy,” Finance Minister Joe Oliver said in a statement.
The change comes just weeks after Morneau announced a $2-billion increase in the corporate tax rate to 20 per cent in 2019, a reduction from the 22 per cent he originally proposed.
The Conservatives have been critical of the government’s plans to boost the corporate income tax rate, but said the change is needed to attract business investment and create more jobs.