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Will gas prices cost Liberals at 
the polls?

[PoliticsWatch Updated 5:30 p.m. August 31, 2005]

OTTAWA  — During a press conference at last week's Liberal caucus retreat in Regina, Prime Minister Paul Martin was asked if he was concerned about the Liberals regaining a fifth mandate in the upcoming federal election.  
   
Martin said he was confident because his government was speaking to the issues that mattered to Canadians. 

"Canadians will, essentially I believe, vote for the party whose values reflect theirs," the PM said. "And I think that it is pretty clear as you go across this country that in fact what we have been saying and what we have been doing strikes a resonant chord."

The PM then rhymed off a number of issues his Liberal party has been dealing with.

"I believe that Canadians support early learning and child care and we brought in a national program. I believe that Canadians support the cities and the communities agenda and we have brought in a national program. I believe that Canadians support a much more aggressive and comprehensive foreign defence policy and that's what we have brought in."

While Canadians may be concerned about these issues, there appears to be one issue that is becoming a growing concern directly affecting the pocketbooks and living standards of everyone that the PM omitted - rising gas prices. 

While a comprehensive foreign defence policy is an important issue, it probably isn't being talked about as much at coffee shops across the country as the hit Canadians are taking at the pumps. 

And that hit became even worse on Wednesday when gas prices soared across the country in the aftermath of Hurricane Katrina, which damaged oil facilities around the U.S. Gulf coast. 

Gas prices rose between five cents and 20 cents a litre across the country overnight. 

In Canada's largest city, Toronto, case prices rose as much as 20 cents to $1.20 a litre at some stations. 

"I think a lot of Canadians are truly shocked by this overnight spike in the retail price of gasoline," said John Williamson of the Canadian Taxpayers Federation in an interview with PoliticsWatch.

"I think it's taken everyone aback and there is going to be a lot of calls from Canadians for some kind of relief from Ottawa."

The relief Williamson is referring to is the amount of taxes Canadians pay at the pumps. 

The Canadian Taxpayers Federation estimates that one-third of the total cost of gasoline is taxes. 

For example, when motorists in Ontario go to the pumps, they pay:

> an 8.5 cent federal gas tax
> a 1.5 federal deficit elimination tax
> a 14.7 Ontario fuel excise 

And then the GST is then applied to the gas and the taxes. 

"Say gasoline is 50 cents," explains Williamson. "You have 10 cents on top of that and then you've got 14.7 cents on top of that and then you have GST. That is on average one-third (the cost)."

The Canadian Taxpayers Federation has been calling on Ottawa to eliminate the 1.5 cent deficit elimination tax that was imposed in 1995 by then finance minister Paul Martin. They say the tax makes no sense given Canada has not had a deficit since 1998. 

They also say the GST should only apply to the retail price of the gas and should not include the federal and provincial taxes. They also want the 8.5 cent federal tax reduced to 6.5 cents. 

Williamson says Ottawa is making a financial killing from the increasing cost of gas largely due to increased GST revenues. 

"For every 10 cents a litre increase over a 12-month period, Ottawa brings in about $175 million more on an annual basis."

Gas prices have increased 20 to 30 cents over the past year and according to Williamson if gas prices remain over $1.20 a litre over the next year, the federal government can expect to have a $500 million increase from GST revenues alone from the previous year. 

Last year, the federal government collected $1.1 billion in gasoline GST revenues, the taxpayers' federation estimates. 

Despite all this, Williamson says there is a political vacuum on this issue of such great concern for so many Canadians. 

"There's the deficit tax, there's no deficit. The GST is applied on the other federal tax and the provincial levy - the tax on tax - and yet we hear really no lawmakers in Ottawa arguing for lower taxes," he said. 

In fact, what Canadians have heard from the Liberals has been the opposite. 

Earlier this month, Environment Minister Stephane Dion said an increase in the price of gas was actually a good thing. 

"We have to get used to changing our way of life," Dion said. "We consume way too much gas. If all of humanity had the same consumption levels as we do, it would take five planets instead of one in order to maintain the planet's capacity for reproduction."

But Williamson said lowering gas taxes is there for any party that wants to have a direct and immediate benefit for Canadians in their election platforms. 

"I think it's time for the prime minister to come forward," he said. "This is not just about economics, but there is a growing political side to it as well. 

"The prime minister has a minority of seats in the Parliament. He is going to be going to the polls some time in the next four to six months. I think that Canadians are looking for some relief here. He should get in front of this issue, cut the gas tax levy a little bit and come out on the side of Canadian motorists."

When Finance Minister Ralph Goodale has been asked about removing the GST on other gas taxes in recent months, he's suggested that removing the so-called tax on tax would have little real impact on consumers. 

"Quite frankly, a change of a penny or two or three is very unlikely to find its way into the hands of consumers because it would be overtaken by those daily fluctuations in the price (at the pump)," Goodale said. 

Williamson said Goodale is incorrect when he says reducing the tax on the tax will not have an impact on consumers. 

Meanwhile, the Conservatives are in favour of adjusting the GST so it is not applied to federal taxes. Conservative Leader Stephen Harper has also said he would put a ceiling on the price gas which the is GST collected but hasn't given an exact amount. 

NDP Leader Jack Layton has asked the federal government to launch an inquiry to find out whether oil companies are colluding to keep the prices high. 

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