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Gasoline tax to drive up costs of goods and services

New tax to contribute up to $200 million towards transportation and infrastructure projects In his annual state of the province speech on Feb.

New tax to contribute up to $200 million towards transportation and infrastructure projects

In his annual state of the province speech on Feb. 12, Premier Gordon Campbell announced a $609 million, three-year program to open up transportation corridors in the province. While the program was welcomed, the decision to pay for it with a new 3.5 cent per litre gasoline tax was greeted less warmly.

"Transportation infrastructure is vital to opening up new economic opportunities for our heartlands," said the premier. "As part of our Heartlands Economic Strategy, we are going to invest in a new infrastructure all across our province so that British Columbians can reach their economic potential and access critical regional services to meet their needs."

With the province facing a budget deficit of more than $2.3 billion this year, the new gasoline tax, which comes into effect on March 1, was the only way to fund the program without increasing the deficit.

According to the province, the provincial government spent $780 million on highways and roads in 2000-2001, but only received $542 million in provincial fuel tax revenues.

"Every penny of the increased fuel tax revenue will be invested in the transportation improvements communities need to help them realize their full economic potential," said Campbell.

With the new tax, residents of Greater Vancouver and the Lower Mainland will have the highest fuel taxes in Canada at 20.5 cents per litre – increasing to 21 cents with a scheduled 0.5 increase to fund Translink services. Taxes will be 17 cents per litre in Victoria, and 14.5 cents per litre everywhere else.

By way of comparison, greater Montreal has the second highest gasoline taxes in the country at 16.7 per cent.

According to the Canadian Federation of Independent Business, the new tax will hurt the economy it is trying to help.

"Given the rapidly rising cost of fuel, it is extremely disappointing that the B.C. government would use this opportunity to make the problem worse, rather than better," said Dan Kelly, CFIB vice-president for Western Canada. "Firms in transportation, the resource sector and construction are significantly affected by fuel prices and there is no question this announcement will take its toll on the economy of the province."

Some critics also question the timing of the announcement. With the situation in Venezuela far from resolved and a war looming in the Middle East, the cost of gasoline was already expected to increase significantly.

The Canadian Taxpayers Federation supports the tax as long as it can be repealed after three years. They also called on the federal government to give back more of the $700 million in fuel tax revenues it collects each year from B.C. through a 10 cent per litre tax – last year Ottawa spent less than $30 million on B.C. roads.

Whistler is one of the communities that will benefit from the tax, with some of the money earmarked for the Sea to Sky Highway upgrade. Of the $609 million budgeted for the next three years, $362 million will go towards rehabilitating existing highways and rural roads, $210 million will go towards strengthening rural and resource road infrastructure, and $37 million will go towards roads that specifically support B.C.’s oil and gas industry.

Specific projects announced include:

• Aggressively pursuing a $670 million upgrade to the Trans-Canada Highway through the Kicking Horse Canyon, cost-shared with the federal government;

• Making improvements to Highway 97 in the Okanagan, Highway 95 in the Kootenays, and Highway 3 connecting Hope to the Okanagan and the Kootenays;

• Making critical improvements to the Sea to Sky Highway to Whistler to improve safety;

• Building a new bridge across Lake Okanagan at Kelowna, and planning a new bridge at needles that will connect the Okanagan with Nakusp and the Arrow Lakes;

• Work with Cranbrook to complete its airport expansion;

• Ensure that no tolls are charged on inland ferries in B.C.

While an improved roadway may benefit Whistler in the long run, the impact of the tax hike will make Whistler a more expensive place to live and visit.

According to Bruce Stewart, the manager of Nesters Market, he has already received notices from trucking companies to advise them of rate increases.

"Some of our suppliers will absorb the extra costs, and some will pass those costs on to us. It effects almost everything, because trucking companies deliver virtually all of our products. Prices go up for goods and services when the costs for these companies go up, that’s just the way it is, and they generally stay up even if the price of gas goes down.

"That said, I doubt our prices will go up at all, at least in the short term," said Stewart, who estimates that the cost of trucking could increase by about five per cent.

The taxi industry will be particularly hard-hit by the increase because their fare rates are regulated by the provincial government.

"Trucking companies can raise their rates to recover some of their costs, but we can’t do that so it’s going to come right out of our pockets," said Eric Larsen, co-owner and manager of Whistler Taxi, Sea to Sky Taxi and Blackcomb Taxi.

According to Larsen, the average taxi driver burns between 50 and 100 litres of fuel each day.

As a concession to taxi drivers, who are already suffering as a result of higher fuel prices, Larsen feels the government should either make taxi drivers exempt from the tax, or allow drivers to apply for some sort of a rebate.

"We have a hard time getting drivers in Whistler as it is, and this is not going to make it easier," said Larsen.

While the business will still be profitable in the winter time, the company loses money in the summer months when business is down by about 70 per cent.

"We already lose money in the summer, and this just means we’re going to be losing even more."

Because of the road conditions in winter, cabs only last about two years, compared to four or five years in the city. In addition, there is no natural gas and it’s too expensive to retrofit cars to burn propane for such a short period of time. As a result, the taxi company doesn’t have the option of switching to cheaper fuel.

Although Larsen has no doubt that the B.C. Taxi Association is lobbying against the gas tax, he doubts whether they will be able to block the tax or create an exemption for drivers.

"This is an extra expense on top of a lot of other new expenses that have come our way lately that we have no way to recover. We can’t charge more, so we earn less."

According to Lisa Landry, the manager of fiscal planning for the Resort Municipality of Whistler, the 2003 budget that is being finalized has not been adjusted to account for higher gas prices. Each department head has a set budget, and it will be up to them to determine how to mitigate extra costs within that budget.

"We’re not going to raise service fees or tax as a result of the gas tax going up," she said. "I remember just a few years ago when the price of propane gas went up by 70 per cent. It was a concern for a few departments, but it didn’t increase anyone’s costs because they found ways to pay for it within the budget. Maybe they wouldn’t hire casual staff as much, or find ways to make their departments more efficient."

The municipality currently spends between $40,000 and $150,000 on gas each year, which Landry says is a small part of the overall budget.

"A three per cent increase in gas prices is not going to have a big impact," she said.