This text is taken from Courrier de l’économie. Click here to subscribe.
Does the fact that our governments have taxes (GST, QST) on gasoline, which moreover raise taxes, place them in a conflict of interest when it comes time to defend ourselves against the abuses of the oil companies, asks Franco Stea, one of our readers.
In Quebec, the various taxes account for about 30% of the pump price of regular gasoline. They are higher in the greater Montreal area since they include an amount of 3¢ per litre, which is used to fund public transit. And a little less in remote, border or peripheral regions, which benefit from a fuel tax rebate.
For example, this tax of 19.2¢ per liter of regular gas was 14.6¢ in the Saguenay region on March 3, according to data from the Régie de l’énergie.
In addition to these geographic location factors, taxation includes two fixed taxes, namely the federal excise tax of 10¢ per litre, and the Quebec fuel tax of 19.2¢ per litre, as mentioned . In Quebec, this tax is devoted to financing road network and public transit infrastructure.
An elevator tax? We are talking here about fixed taxes which, depending on the volume sold, provide the Quebec government with annual revenues of around $2 billion since 2019, but whose elevator effect mentioned is measured by their increasing or decreasing weight depending on whether the price at the pump goes down or up. Added to this are the GST and the QST, expressed as a fixed percentage, but which generate revenues that change according to the vagaries of the volume of gasoline sold and its market value.
This means that 70% of the price at the pump is beyond the control of the Quebec government, i.e. some 64% representing the cost of acquisition (cost of crude oil, refining and transport between the refinery and the gas station) and roughly 6%, on average, taken up by the retail margin.
This 64% portion contains the impact of the carbon market which, at the final sale price of just over $37 per metric ton of CO2 obtained at last February’s emission rights auction, could be equivalent to the addition of 8.5¢ to the price at the pump of a liter of regular gasoline. So far, the carbon market has generated more than $6.9 billion in revenue for Quebec, paid into the Electrification and Climate Change Fund.
Difficult, therefore, for a Quebec which imports a good that is still essential (no pun intended), to have a power of influence on this portion of the price at the pump subject to the diktat of a vast world market responding to the game of the supply and demand and speculative forces. Even the US government could not influence market prices at their peak during the war in the face of an OPEC + under Russian influence. Think of the failure of this attempt to negotiate with Venezuela and of this controversial visit by the President of the United States, Joe Biden, to Saudi Arabia in July 2022!
Could Quebec then lower the tax burden? History teaches that such reductions will rarely completely line the pockets of consumers. Not to mention, also, the signal that governments would send as to the seriousness of their climate commitments.
Finally, it should be noted that the application of the GST-QST is almost generalized in the economy. And that fuel is not the only product to be subject to a special tax. This is also the case for alcoholic beverages, accommodation and insurance premiums.
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