Got some GST with that Carbon Tax?

Canadian taxpayers Federation: Sept 23
Natural gas bills started arriving at homes in September with a new charge -- the Campbell government’s carbon tax. Well, everyone knew it was coming. To be fair, some of the blow will be cushioned by provincial rebates and lower income taxes. But not so the federal portion. The federal portion you ask? As many senior citizens and families are discovering across the province, the GST is applied to the carbon tax even though it is not a good or a service. Since the GST’s inception, the federal government has been taxing taxes. For example, Canadians pay GST on the full pump price of gasoline, including all taxes. The law states the GST is payable on everything unless it has been excluded by legislation. So guess what? Our politicians never exclude taxes. We pay GST not only on the carbon tax but indeed all taxes on gasoline and natural gas. Just how much are we paying on natural gas?

All natural gas that is either sold or delivered in B.C. passes through two companies: Pacific Northern Gas (PNG) and Terasen Gas. PNG serves about 40,000 customers in B.C.'s north. It sells or delivers about 13 million gigajoules of natural gas per year and expects its natural gas sales to be relatively flat. Terasen Gas serves about 900,000 customers in B.C.'s south. It sold or delivered about 221 million gigajoules of natural gas in 2007 and expects that to go up considerably in 2008, to 240 million gigajoules. Why might they expect natural gas demand to go up? According to Dr. Don Easterbrook, a geologist at Western Washington University who has researched global climate change for the past 48 years, the 0.78 degree Celsius temperature drop of the winter of 2007-08 wiped out virtually all the global warming experienced this century and was the single largest temperature change - in any direction - ever recorded.

For Terasen Gas, at least, this means bigger sales. It also means bigger carbon tax and GST revenue for governments. PNG's gas customers will pay a total of about $8.2 million dollars in carbon tax between July 2008 and July 2009, and about $410,000 in GST. Terasen Gas customers will pay a total of about $149 million in carbon tax between July 2008 and July 2009 and about $7.5 million in GST. Even if natural gas sales stayed flat, the carbon tax will triple by 2012. As it goes up, so will the amount of GST gas customers fork over to the federal government. By the time the carbon tax reaches $30 per tonne in 2012, the federal government will probably be collecting at least $24 million in GST. If winters are indeed getting colder, as many scientists think, GST revenue could get even higher as families and senior citizens on fixed incomes struggle to heat their homes.

Governments might argue that the carbon tax and the GST we pay on it is a small price to save mother earth. But when the wheels fall off the global warming bandwagon – as they surely will in the next few years -- how likely is it that the carbon tax will disappear? When the federal government added 1.5 cents per litre to federal gas tax in 1995, it was a temporary deficit elimination measure. We haven't had a federal deficit for 10 years but we still pay the deficit elimination tax. Once governments get hooked on these taxes, it's very difficult to ever get them unhooked. The carbon tax will not be revenue neutral to families, may or may not be revenue neutral for the provincial government, but will certainly prove a cash cow for the federal government.