Madam Speaker, I would like to reiterate what others have said about this government's concern with the recent hike in oil prices.
Hurricanes Katrina and Rita have caused a drastic drop in crude oil production and refining; as a result, crude oil prices have been fluctuating greatly.
I should also repeat something all hon. members know: oil is not just any commodity for Canadians, or anyone around the world for that matter, because its derivatives are at the heart of our global economy.
We have all witnessed, many of us as participants, the long lines of cars waiting to fill up at gas stations when there is rumour of a new price increase at the pump. As uncertainty grows so does the demand, and the result is always the same: further increases, and I might say insane increases, in prices.
Unfortunately, the rise in gas prices goes well beyond the hit on the pocketbook that consumers feel at the pumps. As a net exporter of petroleum, Canada has seen its currency rise along with the price of oil, giving us the distinction and challenge of having what many financial analysts rightly or wrongly are calling the petrol loonie. This in turn is creating pressure on our export sector as the price of Canadian goods and services rises in foreign markets.
To make matters worse, oil and its derivatives are the lifeblood of Canada's manufacturing economy, chemical and pharmaceutical industries, which increases their costs, reduces their profit margins and heightens competitive pressures.
Even at the level of national unity and federal-provincial fiscal arrangements, the recent rapid run up in the price of oil has created, as many of my colleagues have said, tensions between the provinces, those of them that are geologically blessed with oil wells and those without who feel that all Canadians should benefit from these national resources.
In fact, no Canadian can escape the pinch of rising crude oil prices.
These are challenges with which all governments in every part of the world must come to grips, not just the Canadian government. However what concerns us here tonight is what the Canadian government must do to help the Canadian consumer.
One bright spot is that, if anything, in the global context of oil market and stability, Canadians are fortunate, believe it or not, to be living in a country that is a net exporter of these valuable commodities and that has some of the lowest gasoline taxes as compared with its major industrialized competitors. We only have to go to Europe to see what the price of petrol is, as they call it over there.
Much attention has also been directed to the role that taxation plays with respect to influencing the retail price of fuel. Accordingly, I would like to take this opportunity to speak for a few minutes to the federal taxation of fuels, namely gasoline and diesel fuels.
If we carefully examine the federal taxation we know that this shows clearly that a recent price increase is a result of the high cost of crude oil on global markets exasperated by disruptions to the petroleum supply chain as a result of the devastating hurricanes in the southern United States.
The federal taxation of fuels consists of two elements. The first is the federal excise taxes that are levied at a fixed rate and the second is the goods and services tax that applies generally to most goods and services in Canada and this includes fuels.
I would like to spend a few minutes on the federal excise tax and then, if time allows, on the goods and services tax.
The federal government levies excise taxes on gasoline, aviation gasoline, diesel and aviation fuel. It is worth noting that there are no federal excise taxes applicable to other kinds of fuel, such as home heating oil, propane, natural gas or electricity.
The federal excise tax on gasoline and aviation gasoline is levied at the rate of 10¢ per litre, while the federal excise tax on diesel and aviation fuel is imposed at the rate of 4¢ per litre.
Federal excise taxes are fixed amounts that do not vary with changes in the retail prices of fuel. This means that revenues from federal excise taxes are a function of the volume of fuel that is sold but not of the retail price.
Accordingly, the recent increases in retail prices for gasoline and diesel fuel do not have any positive impact or any impact on federal excise tax revenues. In fact, to the extent that higher pump prices cause motorists to drive less and reduce their consumption of fuels, federal excise tax revenues could actually decline.
I would like to also note that the excise tax on gasoline has been levied at the same rate since 1995, 10 years ago, while the excise tax on diesel fuel has been unchanged since 1987.
With respect to revenue, the federal excise tax on gasoline raised about $4 billion in revenues during the fiscal year ending March 31 last year. The excise tax on diesel fuel raised about $900 million, while the levy on aviation gasoline and aviation fuel contributed $80 million over the same period.
All federal excise tax revenues from fuel go to the consolidated revenue fund where they are used to support a wide range of programs that are valued by Canadians, including health care, education and programs for seniors. Contrary to what some of the colleagues across the floor have said, this is not a matter of just simply raising taxes in order to hide the money from the consumer.
What these taxes do in fact is that they are returned to the Canadian public in the form of help on health care, on higher education, on immigration and so on. These taxes do not disappear. They go back to the Canadian public.
In fact, in the budget 2005 the government delivered on its commitment to share with cities and communities a portion of the revenue from the federal excise tax on gasoline to support environmentally sustainable infrastructure.
Beginning in 2005-06, funding for this initiative will ramp up every five years for a total of $5 billion. By 2009-10 funding will amount to $2 billion per year, the equivalent revenue of 5¢ of federal excise tax on gasoline, fully one-half of federal gas tax revenues. That is only one example of where this money goes.
With respect to the environment, in recognition of the fact that renewable fuels offer a number of important benefits, excise tax relief has been provided since 1992. Another of my colleagues referred to this a little earlier, the portion of blended gasoline that is ethanol or methanol produced from renewable sources such as biomass. In budget 2003 excise tax relief for renewable fuels was extended to include the ethanol or methanol portion of blended diesel fuel as well as biodiesel fuel.
This concludes my overview of the federal excise taxation of fuel, but I would like to say a few words about the goods and services tax. This is levied on most goods and services in Canada, including motor and home heating fuels at a rate of 7% of the final selling price. This is where it hurts. This maintains a broad base which allows the GST to be levied at a relatively low rate and makes compliance with the tax much easier for businesses. Remember that when the GST was first introduced in the House, businesses, particularly small and medium size businesses, had a great deal of trouble keeping track of what they were levying on the customer and this particular system allows them to find their way through the system much more easily.
One of the key features of the GST is that businesses are able to claim input tax credits in respect of the GST they incur when purchasing goods and services that are used to make taxable supplies. This means that most businesses are able to claim full refunds in respect of the GST they pay on their purchases of petroleum products, including gasoline and diesel fuel. For individual consumers the GST low income credit is designed to help offset the impact of the GST to those most in need.
I know I will not be able to go further in what I had prepared to say about the GST, but let me say this in conclusion.
This is a difficult situation. That is why, this evening, on our first day back in Parliament, we saw fit to discuss and debate this issue that is important to all Canadians, whether they are private customers or company customers. Those who depend on their vehicles for work are feeling the pinch even more.
Members on both sides of this House are looking for a balanced approach that would relieve the pinch on Canadians while at the same time allowing the Government of Canada to deliver on the promise of assistance previously made to the municipalities. There are great needs there.
