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Finance officials argue against lowering gas taxes  

[PoliticsWatch Updated 6:50 p.m. September 22, 2005]

OTTAWA  — Conservative MPs accused finance department officials appearing before a special parliamentary committee hearing on gas prices of spinning for the government against reducing taxes on gasoline on Thursday.   
   

The Commons industry committee held hearings all day Thursday and heard from industry executives and federal bureaucrats about the rising cost of gasoline in Canada. 

In his presentation before the committee, Serge Nadeau, general director of analysis for the tax policy branch of the finance department, argued against reducing federal taxes on gasoline prices as a way to bring down the price. 

The federal government charges an excise tax of 10 cents a litre on gas as well as 7 per cent GST on the total cost of the purchase. 

Some groups have called on the federal government to stop charging GST on the total price of gas, which includes federal and provincial excise taxes. 

But Nadeau told the committee that the tax on the tax only amounts to two cents a litre in additional revenue and called the amount "relatively small."

Nadeau also used his appearance before the committee to "highlight an important initiative" taken by the federal Liberals to share a portion of gas tax revenues with the cities. 

The bureaucrat's presentation angered Conservative MPs on the committee, who view reducing federal taxes on gasoline as the main way the federal government can reduce high gas prices. 

Conservative MP Michael Chong described the finance department's presentation as "something that is an attack on our position."

"I thought you were the department of finance, not the PMO," Conservative MP John Duncan told the finance official. 

Nadeau defended his claims that reducing the tax on the tax would not save consumers that much money. 

"As an economist, I can say that two cents a litre is not significant," he said. 

Earlier in the day, a number of oil industry representatives and executives appeared individually before the committee and blamed the rising gas costs on world oil price fluctuations driven mainly by increased demand from the developing economies of India and China. 

They also said refining capacity in Canada is a factor affecting supply. 

All said the only difference between Canadian prices and U.S. prices is the higher taxes charged in Canada. 

Meanwhile, officials from the Competition Bureau of Canada appeared before the committee. 

Sheridan Scott, commissioner of competition for the bureau, told the committee that at a recent meeting with eight consumer groups high gas prices was at the top of the agenda. 

She told the committee that the bureau has been closely monitoring gas prices since the large spike seen after Hurricane Katrina affected oil supply in the U.S.

Scott also said that since 1990 the bureau has conducted five investigations in spikes in gas prices. 

"In these, we found no evidence to suggest that periodic price increases resulted from a national conspiracy to limit competition in gasoline supply, or from abusive behaviour by dominant firms in the market," she said. 

"Indeed, following each price spike, market forces caused prices to return to historic levels."

With Hurricane Rita approaching the Houston area where 14 per cent of the U.S.'s refining capacity is located, one oil industry official told reporters that he expects that affect on supply will certainly mean another spike in gas prices in the coming days. 

The fears about Hurricane Rita affecting prices prompted panic buying by motorists and price increases by dealers across the country on Thursday. 
 

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