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Small Business Calls for Gas Tax Relief, Monitoring of Oil Companies

Posted on: Tuesday, 13 September 2005, 18:00 CDT

OTTAWA (CP) - An influential small-business group is calling on the federal and provincial governments to cut gas taxes, warning that soaring prices are hurting consumers and the economy.

The Canadian Federation of Independent Business, which represents 105,000 small-and medium-sized businesses, also wants Ottawa to monitor oil companies to ensure there is no collusion. In an open letter to Prime Minister Paul Martin on Tuesday, the federation said the situation will get worse unless governments act fast.

"Combined federal-provincial taxes represent between 40 to 50 per cent of the price of gas in Canada, as compared to 20 to 30 per cent in the U.S.," the federation wrote.

"We believe that the overall level of tax on gas in Canada is too high and should be brought closer to the U.S. rate."

The federation also wants the provinces to put a moratorium on fuel taxes, as some American states did in the wake of hurricane Katrina.

CFIB president Catherine Swift doesn't buy federal arguments that lowering taxes may not benefit consumers.

"I've heard the excuses that both Prime Minister Martin and Finance Minister (Ralph) Goodale have given and they are lame in the extreme," Swift said in an interview from Toronto.

Goodale has said that lowering taxes might reduce gasoline prices for a day or two, but he was skeptical of a longer-term impact.

"Oh, come on," said Swift. "That's a ludicrous argument that you could use for any tax. It's just not true."

CFIB members were recently asked whether they believed fuel taxes should be reduced to control rising energy prices. Interim results of the survey showed that among the 6,730 respondents, 72 per cent of business owners said yes.

In the wake of hurricane Katrina, some American states have instituted a moratorium on fuel taxes to alleviate the impact of higher prices. The federal and provincial governments should give serious consideration to a similar measure, said the CFIB.

While lowering taxes may ease the burden on consumers slightly, dealing with refining capacity and reforming the federal Competition Act are key to better controlling prices at the pump, said Dan McTeague, a Liberal MP who has been fighting for greater competition in the energy sector.

"It needs to be overhauled to be more deferrential to enhancing competition rather than diminishing competition," he said.

"The mergers provisions of the Act promote (industry) intensity and encourage monopolies."

The federation agrees.

"Industry reports show that the refining margin of Canadian refineries is currently at an all-time high," states the letter to Martin.

"We recommend that the Competition Bureau monitor closely developments in the industry for any evidence of price fixing or price gouging."

In Montreal, Henri Masse, leader of the Quebec Federation of Labour, called for the federal government to put a temporary tax on excessive profits earned by oil companies.

"Let's not wait until the point of no return that's caused unacceptable inflationary pressures after past oil crunches," he said.

A key parliamentary committee will return to Ottawa next week to review soaring gasoline prices.

The industry committee will hold a one-day session on Sept. 22, four days before the House of Commons begins a new session.

The federal competition watchdog has already reviewed gas prices five times in the past 15 years.

There are three major players in Canada's gasoline industry - Shell, Petro Canada and Esso.

"All (of them) have the characteristic symptoms of acting as an oligopoly," said McTeague, a market condition where there are so few sellers that the actions of any one of them will affect prices and hurt competitors.

"They drive prices up instantaneously without any due regard to market forces."

Source: Canadian Press

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