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. 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.

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