Open Letter

CFIB issues open letter on fuel costs: Small business calls for tax relief and assurances of no new taxes on fuel
June 3, 2008

Hon. Jim Flaherty, Minister of Finance, Canada
Hon. Carole Taylor, Minister of Finance, British Columbia
Hon. Iris Evans, Minister of Finance, Alberta
Hon. Rod Gantefoer, Minister of Finance, Saskatchewan
Hon. Greg Selinger, Minister of Finance, Manitoba
Hon. Dwight Duncan, Minister of Finance, Ontario
Hon. Monique Jérôme-Forget, Minister of Finance, Quebec
Hon. Victor Boudreau, Minister of Finance, New Brunswick
Hon. Michael Baker, Minister of Finance, Nova Scotia
Hon. Wesley Sheridan, Provincial Treasurer, Prince Edward Island
Hon. Tom Marshall, Minister of Finance, Newfoundland and Labrador
Hon. Dennis Fentie, Premier and Minister of Finance, Yukon
Hon. Floyd Roland, Premier and Minister of Finance, Northwest Territories
Hon. Louis Tapardjuk, Minister of Finance, Nunavut

Dear Ministers:

On behalf of the Canadian Federation of Independent Business (CFIB) and our 105,000 members across Canada, I am writing to outline the challenge facing small and medium-sized businesses with respect to the rapidly rising cost of fuel. In addition, we are calling on your government to take a few important steps to alleviate a portion of the problem and to provide us with an assurance that there is no plan on the part of government to make it worse.

In CFIB’s recent Business Barometer™ survey, independent businesses were most likely to report rising energy costs as the factor that has worsened their business performance. As you know, our report for the first quarter of 2008 reported that small business confidence for the year ahead has remained at a lower level than in previous quarters. A full 71 per cent of entrepreneurs suggested that energy costs were a factor negatively contributing to the problem.

This issue particularly affects small business in rural and northern Canada. The impact of rising energy prices was most significant on our members in the agri-business sector, followed by transportation and wholesale trades. For example, many greenhouse growers are reporting massive increases in fuel costs that may affect the viability of some in the industry.

While we understand that fuel prices are largely determined by the international marketplace, we urge both Federal and provincial/territorial governments to look at the tools within their control to help reduce the negative impact.

As we have in the past, we renew our call for the Federal government to immediately eliminate its 1995 budget measure to increase the gasoline excise tax by 1.5 cents per litre to help fight the deficit. While the deficit was eliminated in 1998, the additional tax has remained. We also urge the Federal and provincial/territorial governments, where applicable, to eliminate the anomaly of additional sales taxes on top of the Federal and provincial/territorial fuel taxes.

We further urge all governments to review all forms of Federal, provincial/territorial and local fuel taxes in light of the rising costs on small businesses and consumers. Currently in the United States, presidential candidates in both parties are discussing possible ways of reducing pressure on consumers facing rising fuel prices. We believe it is important that Canadian governments begin this dialogue as well. Most importantly, we ask that all governments place a moratorium on any plans for additional fuel or carbon taxes. These discussions cause great nervousness among entrepreneurs – particularly at a time where firms are struggling to adapt to the pressure of rising energy and other input costs. Any government or political party promoting a new or increased fuel/carbon tax – regardless of the justification – will appear extremely insensitive to consumers and small business owners at this time.

For our part, CFIB is currently surveying its members across Canada on their views of a carbon tax. We have already surveyed our members in British Columbia following the 2008 provincial budget and found that only 14 per cent of our BC members were supportive (56 per cent opposed) of the introduction of the new tax structure, even with the promise of revenue neutrality for the provincial government.

This view appears to be shared by the general public in BC. A March 2008 poll by Compas Inc. for the Vancouver Sun found that 61 per cent of the public called the carbon tax “bad”. Less than half felt it would help fight climate change. What is also interesting is that a third of those who opposed the tax did so because they felt that fuel is already highly taxed. It should be remembered that all Canadian governments already have carbon taxes – we just call them different names.

Further, we do not believe that carbon taxes can be truly revenue neutral. Even if a government cut its own taxes by a commensurate amount to the new revenue, it will certainly not be revenue neutral for consumers. For example, BC municipal governments are already reporting they will have to increase property taxes to help pay for the new carbon tax. Also, while the BC carbon tax may be revenue neutral for the provincial government itself, it will not be revenue neutral for individual firms or families as many will see their fuel bills increase by far more than any tax saving in other areas. For example, increased fuel taxes for the transportation sector will quickly eclipse any tax savings.

Related to the issue of a carbon tax, we want to ensure all governments know that CFIB has recently issued a major study on environmental issues, Achieving Eco-Prosperity: SMEs’ Perspectives on the Environment. The report demonstrated that small businesses are already doing a great deal to address environmental priorities, but require better information and less burdensome regulations to do more. We would be pleased to share this with you at your convenience.

In summary, small businesses are counting on governments to:

1. End the 1.5 cent per litre additional Federal fuel excise tax originally introduced as a deficit reduction measure;
2. End the tax-on-tax anomaly that artificially inflates fuel prices and government revenue by eliminating all sales taxes on existing Federal and provincial fuel taxes;
3. Undertake a review of all forms of Federal, provincial/territorial and local fuel taxes – including diesel fuel – in light of the current price environment; and,
4. Place a moratorium on any discussions or implementation of additional fuel or carbon taxes.

Thank you for considering the views of Canada’s small and medium-sized business owners.

Sincerely,

Garth Whyte
Executive Vice-President

cc: All Members of Parliament