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Economy
Politics

Should the Northwest Territories pause tax on gas or not?

Last modified: March 12, 2022 at 1:26pm


The NWT government is being asked to temporarily stop charging tax on gas and diesel to combat soaring prices. That step, if taken, comes with consequences.

In most parts of Canada, gas prices this week were more than 50 cents per litre more expensive than the average price for the same region in 2021. There has been a similar impact in the NWT, where prices are already usually higher than in southern provinces.

The increase is mostly driven by Russia’s invasion of Ukraine. North America and Europe are attempting to avoid Russian oil supply where possible, decreasing supply and raising the cost of fuel from other areas.

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Higher prices come at a time when inflation was already reaching levels not seen in decades.

In communities connected to highways, the territory takes around ten cents a litre in tax on gas and diesel used for road vehicles. That falls to around six cents a litre for gas in communities not connected to highways. The tax does not apply to home heating fuel.

On Friday, Tu Nedhé-Wiilideh MLA Richard Edjericon asked finance minister Caroline Wawzonek whether she would consider pausing gas tax in the NWT as a means of helping consumers meet higher costs.

“Inflation hasn’t been this high in generations,” Edjericon said in the NWT’s legislature. “Constituents in my riding are feeling the pain, especially at the pumps.

“Gas prices this morning in Yellowknife are $1.75 a litre and economists are warning that prices will go higher still as sanctions on Russia get tighter.

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“Earlier this week, the Government of Alberta acknowledged this burden on their residents. They didn’t only acknowledge with their words, they took action.”

Alberta has decided to pause its gas tax, estimated to save a family in the province around $130 a quarter. However, rising oil prices also have the effect of increasing Alberta’s revenue, meaning the province is likely to see an overall positive financial impact from higher prices even if it cuts off tax revenue from fuel.

The Northwest Territories is not in the same position. Pausing the tax means losing income that won’t be replaced, to any meaningful extent, by increased royalties from the oil industry.

Rylund Johnson, the Yellowknife North MLA, said on Twitter this made a pause on gas tax the wrong move for the territory, asking what the impact would be on government programs and services if the NWT lost revenue relied on to pay for them.

“Pausing fuel tax at the pump would be a subsidy to driving,” Johnson wrote, “in exchange to a cut to programs and services in a territory that is struggling to offer basic services such as health, education, water and sewer.

“This is not a priority.”

Nevertheless, Wawzonek said cabinet was considering whether to take action.

“It’s difficult,” the finance minister said, “to say we’re going to slash taxes without giving some consideration to what those impacts are.

“I’m having déjà vu to two years ago when the situation was changing so rapidly with the beginning of Covid. And now, here we are facing a bit of a different financial crisis.

“I’m well aware that this is going to have an impact on northern residents. We want to figure out what that impact might be and what leeway we have to do something about it.”

Fears over heat and power costs, too

Meanwhile, asked by Inuvik Twin Lakes MLA Lesa Semmler how the territory will respond if home heating fuel costs rise significantly, Premier Caroline Cochrane this week said she expected national intervention.

“At this point, it’s a matter of finding out what we’re dealing with, talking to the premiers across Canada,” Cochrane said.

“This isn’t an issue just for the NWT. It’s all of Canada facing this issue and so the federal government will be expected to provide some assistance as well.

“But I do know that the heating fuel in the territory is extreme and we do need to make sure that our residents have the ability to heat their homes.”

Power costs are also a concern. The NWT Power Corporation is expected to submit its latest application for a new set of power rates to the Public Utilities Board, which must approve any such application, by the end of this month.

So far, asked twice in the legislature, both the premier and the infrastructure minister have declined to specify how those rates might change.

“With the cost of fuel, a potential cost in power increase, inflation, our groceries are astronomical especially in the smaller communities – is the government looking at a way to keep our costs low?” Semmler asked.

“Is there going to be a plan in place? Is it going to be public? I’m afraid we will be losing more residents if our costs continue to increase, or else this government better increase the money that’s going to income support.”

Cochrane replied: “When we first began this government, we didn’t know what we were coming up against. We didn’t know about Covid. We didn’t know about potential of a world war. We didn’t know about the cost of inflation that would be happening.

“We made 22 priorities, huge priorities. And I think we’re still trying to address those priorities and still, at the same time, address the realities of Covid, the realities of inflation, the realities of a world war potential.

“We do need to make tough decisions … we don’t have enough money to solve world peace. We don’t have enough money to do everything that all members will want done. I’m hoping that regular members will assist us in that work as well because there will be tough choices, and we have to make sure that the priorities are priorities for all residents of the NWT.”

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