STANDING COMMITTEE ON PUBLIC ACCOUNTS
Mr. Russell MacKinnon
Now the way the process works, as you are probably familiar with, we have some opening remarks by our witnesses, if they so choose and then we will open up the floor to questions. Perhaps, in fairness to the witnesses, we will allow the individual members to introduce themselves so you will know who you are speaking with. We will start off on my immediate left.
[The committee members introduced themselves.]
MR. CHAIRMAN: Mr. Hogg.
MR. WILLIAM HOGG: Thank you, Mr. Chairman. Good morning and thank you for inviting us here today. As you mentioned, with me is Bruce Hennebury, our Director of Fiscal Policy with the Department of Finance. I was specifically asked to come here to discuss the revenues to Nova Scotia from gasoline, home heating and natural gas. Just a reminder for those who maybe don't look at this subject every day is that gasoline and diesel fuel are subject to provincial fuel tax and the harmonized sales tax. Home heating fuel is subject to the harmonized sales tax only.
The motive fuel tax revenues, which would be gasoline and diesel, are forecast to be $220 million for this fiscal year. That is, approximately 4.5 per cent of our total revenues are derived from gasoline and diesel taxes. That is the fixed portion of the tax, not including the harmonized sales tax. The $220 million is actually $12 million less than what was budgeted in April. A portion of that, $5 million, was due to a rebate to a single customer due to an error in their filing but the remaining 7 per cent is due to a reduction in consumption for whatever reason, whether it is conservation by consumers or whether it is just a difference in the number of users or miles driven. Gasoline sales are down 2.8 per cent to October 31, 2000 over the same period in 1999. Conversely, diesel consumption is up slightly, 1.6 per cent, over that same period.
Back in December, I provided the chairman of the committee with a letter in response to a question with some estimates of the HST revenue received from petroleum products. As I mentioned in the letter, we can make some assumptions about the motive fuel taxes because it is based on consumption. The assumptions about HST revenues are much more difficult and, in fact, we do not forecast or update HST revenues by any particular commodity, including petroleum products. In our December forecast update, we indicated that all HST revenues were forecast to be up about $8.5 million or 1 per cent. As was pointed out in the update and as I just mentioned, this is an increase due to a general increase in spending that hasn't been attributed to any particular commodity.
In the invitation, there was reference to natural gas revenues. Natural gas has not been widely used in Nova Scotia yet, so the tax impact to the province is negligible. Once natural gas is on-stream, the harmonized sales tax on natural gas, if consumed by commercial enterprise, would be rebated to them as an input tax credit, which is the common operation of the harmonized sales tax on any other good.
Those are my brief opening comments, Mr. Chairman. Bruce and I would be glad to take any questions or enter into any discussion that might be helpful to the committee.
MR. CHAIRMAN: Thank you, Mr. Hogg. We will start off, with the agreement of the committee, let's say 20 minute rounds starting off, and we will commence with the NDP caucus.
MR. JOHN HOLM: Thank you very much, Mr. Hogg. A few things. I am looking at the data here and I confess, there was a mix-up so we didn't have some of the data early enough to go through it in the detail that I would have liked and the fault appears to have been with our office. My question, though, first of all, most of the data appears to be for up to the year 2000, and the early part, and not too much in the latter section.
First of all, I appreciate that the set fuel fee is 13.5 cents per litre of gasoline, I think it is the same for diesel fuel, but the HST is added onto that. How have the volumes of consumption - and you must be having that on a regular basis - for the past year compared with 1999?
MR. HOGG: I have some data here that I would be glad to share with you, if you would like.
MR. HOLM: I would appreciate it.
MR. HOGG: It may not match exactly what you are looking for but the information I have is for gasoline and diesel. We have compared it month over month, for example April 1999 compared to April 2000, and the most recent data we have is for October 2000. That is where I derived the information that I referenced in my opening comments. What you can see is that the gasoline has consistently decreased over the previous year, roughly around 2.5 per cent, almost reaching 3 per cent. Diesel fuel is increasing somewhat sporadically and there are a few variations in some of the numbers that could be for any reason, but the general increase seems to be around 1.5 per cent.
MR. HOLM: When we are talking gasoline and diesel, how much of the total volume is made up by diesel and how much by gasoline?
MR. HOGG: Just to give you an idea, during all of 1999, the total number of litres of gasoline sold was 1.2 billion. The total number of litres of diesel consumed was 372 million.
MR. HOLM: So approximately a little over one-quarter of it is diesel.
MR. HOGG: Correct.
[8:11 a.m. Mr. James DeWolfe took the Chair.]
MR. HOLM: Okay, so the total decline, of course, would probably be somewhere in the range of about 1.75 per cent. That is just quick guessing off the top of my head. Now, in terms of the price of gasoline - and it depends on where you are today - it might be 77.9 cents as it was in Cape Breton or it could be as low as I saw it yesterday, for 73.9 cents, but in most places the largest volume of it is around 78 cents a litre. If we go back to 1999, what was the price of gasoline? Do you have that figure? Is that not in the 60's?
MR. HOGG: I don't have that with me although in the binder I think they had, I don't know that I could find it, but back in February 2000 there was a Public Accounts Committee session in the Dennis Building and I believe there is some information in there about 1999 prices. Actually, it was an Economic Development Committee meeting.
MR. HOLM: Okay, in February 2000, it would have been 72.9 cents, the pump price. It was 51.9 cents in 1999.
MR. HOGG: Yes. It seems a little low but those were the numbers at the time, yes.
MR. HOLM: When those prices have gone up, of course there is a pyramid tax. As the fuel pump or the crude prices go up and the distributor prices go up and, of course, the companies that are making these record profits, I think Exxon-Mobil's profits went from about $5.-something billion to over $17 billion I think were the figures that I saw, partly because of refining increased margins. These big boys are tagging on excess profits as prices of crude have gone up. Then on top of all of those, of course, is the HST. Nova Scotia gets 8 per cent of that. Have you ever figured out how much if, for example, the volume of gasoline was 1.2 billion in 1999, even with the reduction of let's say 2.5 per cent and compare that to the average price in 2000, how much additional HST, provincial portion - and it would be interesting to know the federal portion as well - was collected on that?
MR. HOGG: I think in my letter of December 19th, which I believe is in the binder, we did an analysis quite similar to the question that you are asking. We did it for the six months ended September 30th.
MR. HOLM: Prices, though, have gone up considerably since then.
MR. HOGG: Yes, but the HST that we calculated in September 2000 and September 1999 were based on the fuel prices at the time. So if you are looking at HST only on gasoline, you can see that for six months . . .
MR. HOLM: A little over $4 million?
MR. HOGG: Yes, $4 million.
MR. HOLM: On home heat oil?
MR. HOGG: I haven't done that calculation on home heat oil.
MR. HOLM: Because that has taken an even bigger jump.
MR. HOGG: It has, although I think it has dropped down just recently but where it will end up . . .
MR. HOLM: But over the past year the home heat oil, I mean it was selling at approximately 50 cents a litre. In fact, it has been over 60 cents a litre for periods of time, versus it was in the very low 40's and even in the 30's.
MR. HOGG: I don't have any up-to-date information on home heating oil other than February 2000, about a year ago, running in the 57 cents a litre range.
MR. HOLM: You haven't tried to figure out how much additional HST has been collected on that much higher price, then?
MR. HOGG: No, and I haven't looked at the consumption of home heating oil to see whether there is a change in consumption as well or in addition to the change in the price which would both have an impact on the, I would say, theoretical HST that we would include in our revenues.
MR. HOLM: If one wants to, and I am going to make some assumptions here, and yes, there was a decline in the volumes of gasoline that were sold, quite conceivably that was in significant part due to the drop in tourism that has occurred with higher costs. We had far less people travelling to this region. Diesel fuel is up, which is probably an indication of the economy of the province as a whole. People don't really have the same options in terms of not heating their homes and that is an area that has been affecting Nova Scotians dramatically, and of course the province has come up with this very meagre plan of $50 rebates, which I won't get into that because that is not the topic of today's hearing. However, I would suggest that by the extension, they are probably going to have about the same level of success this year as they did last year in terms of the take-up rates.
It has been a colder winter and surely the department must be tracking or have some kind of an indication on a monthly basis. It may not be all charted through but as you are getting ready for your budget preparations, you must have some kind of an indication in terms of the volumes of home heating fuel that are being purchased and how the HST is or isn't impacting upon that.
MR. HOGG: The consumption data that we use comes from Service Nova Scotia and Municipal Relations who have the ongoing data from the retailers and the wholesalers, if necessary, to get the data on consumption. The reason that we . . .
MR. HOLM: How often is that provided?
MR. HOGG: The people who pay both their gasoline and HST provide monthly returns. We have the returns as of October because of the allowed lag, I guess I would say, in people reporting the information. They have at least 30 or 60 days to report which is of the previous month. So there is always a bit of a lag built in. The consumption data that we follow is that data that has a direct impact on revenues. So the gasoline and diesel tax is directly correlated to the number of litres consumed. The HST is quite a different matter.
It wouldn't really serve any useful purposes for revenue forecasting or revenue predicting to go through each commodity item and try to predict the HST component that was going to increase or decrease. A much better indicator of what HST revenue is going to be or any value-added tax is a formula that takes into account the general economy, people's disposable income, consumer spending, all of those kinds of things so you get an averaged higher level estimate of what the revenues would be.
MR. HOLM: You are talking about the total of revenues possible?
MR. HOGG: Exactly.
MR. HOLM: But the government has argued that they have not been getting any kinds of windfall types of profits as a result of the increased costs of gasoline and home heat fuel. I can appreciate if you have somebody on a low, moderate or fixed income, that if their heating costs have gone up by 30 per cent or 50 per cent to heat their homes, that yes, they might have to reduce purchases in some other areas and so the province could yes, overall, lose some HST, somebody doesn't buy a new refrigerator that they maybe need or would like to have. Instead, they decided to fill up the fuel tank twice more in the run of a year so that they have some heat. It is coming into a total pot, I acknowledge, but it is not necessarily hitting people equally. Those who can least afford it are being forced to pay the higher costs.
Upon what does the government base its assertion that it is not making more money - I am not talking the total pot - from the HST on home heat fuel and gasoline, if they haven't done those detailed calculations?
MR. HOGG: I think we might be straying a little bit into the political arena, which is not really my area. I am not totally familiar with exactly the assertions you are referring to, whether it was on home heating oil or whether it was in total.
MR. HOLM: I am not trying to be political, I will remove from that question - if it makes you feel uncomfortable - about what the government is saying. Is it fair to say, based on what you have seen, that the amount of money being collected from HST on home heat fuels, for example, is higher than it was one year ago?
MR. HOGG: I can't answer that question directly but what I can say is HST revenue in our forecast is $8.5 million higher than what was in the estimates.
MR. HOLM: It is $8.5 million higher but you have no idea where that $8.5 million is coming from?
MR. HOGG: You could backtrack and calculate the number of litres of home heating oil times the average or assumed price and then calculate out of the HST the Nova Scotia portion. That would give you a number that could be attributable to home heating oil. What it doesn't give you is all of the other spending decisions and cost decisions that consumers make
but that is a way to get back to an inputted number of how much of the HST and possibly the $8.5 million increase is attributable to any one commodity, specifically home heating oil.
MR. HOLM: Is it conceivable that one would find that the percentage or the amount of the increase from home heat fuel is actually higher but others are lower and therefore that is what it works out to be, an $8.5 million increase but in reality the increase for home heat fuel - the HST portion from that and gasoline products - is greater than that amount but there was a decrease in something else from what was projected?
MR. HOGG: Exactly, that is quite possible. If we are talking about home heating oil, for example, I think in your earlier comments the assumption that consumption would probably be higher or at the very least unchanged from last year is probably a good one. I haven't looked at the actual litres but assuming that it is the same or increased slightly and if the price increases, then the calculation of how much HST is attributable to home heating oil would be higher. I really don't have any idea how much that is or how that would compare to the $8.5 million.
MR. HOLM: Does your department do that kind of calculation as part of the budget preparation, to come up with what your projections are, in terms of the overall?
MR. HOGG: No, as I mentioned before, when we do our projections it is on a global basis. If we were to go down commodity by commodity, you risk at least three very big risks. One is you make the wrong assumption about consumption. You make the wrong assumption about price and price direction. You make an assumption about people's spending patterns and also, you may leave out a commodity that . . .
MR. HOLM: But I am not asking you to make projections for the future, you can do that easily enough on the actuals from last year.
MR. HOGG: I must have misinterpreted your question. I thought you were asking how do we do our budgeting projections.
MR. HOLM: No, what I would like to find out is if you do that on the actual numbers from the previous year and if you do that on the actual numbers, would you agree to provide that information to this committee so that this committee can see exactly how much HST was collected on home heat fuel and on gasoline and diesel products last year as compared to the previous year and would you provide that to this committee?
MR. HOGG: I am going to have to split your question into two. You asked about the HST on gasoline products and I think that my letter in December, at least as of September, provided a printed analysis. We do have one further month since then, to October, but the consumption and price hasn't changed appreciably so these numbers are still in the ballpark. In terms of home heating oil, I think I will ask Mr. Hennebury to talk about the kind of data that comes in because you can make an estimate of the consumption of home heating oil but it is not . . .
MR. HOLM: You said they report on a monthly basis the consumption. So if you have the reports on the consumption and you would also have the prices, I don't understand why you can't easily break out the amount that would be collected and compare it year to year. I feel like I am getting a long version of the answer, no.
MR. CHAIRMAN: If I might interrupt for a moment, we have already gone one minute into the next time allotment and we can perhaps take it off the next session and perhaps you can come back to that question. I would like to now turn your attention to the Liberal caucus and Russell MacKinnon will start off.
MR. RUSSELL MACKINNON: Mr. Chairman, my questions aren't going to be any more friendly. I am a little concerned, Mr. Hogg, that you have inferred or suggested that your projections are political projections and that is why you weren't able to give some substance to the question that was raised by my colleague for Sackville-Cobequid?
MR. HOGG: No, I was referring to the assertions that have been made about various things dealing with HST increases. The information I provided is based on the data that we get but how people characterize it and talk about it, that is for others to deal with.
MR. MACKINNON: What are the assertions that you are referring to as being political?
MR. HOGG: If I recall the question was, the government has asserted that there was no windfall or little windfall profits, tax-wise, from home heating oil or gasoline sales and/or diesel sales. The reason I can't really provide any useful comment on that is I honestly don't know exactly what was said, whether they were covering all petroleum products, if it was just gasoline or just home heating oil. That is what I meant by getting into the political arena because I believe he was referring to a lot of the dialogue that happens in the House, but nothing to do with predicting the revenues or going back after the fact to do a calculation of what it might have been.
MR. MACKINNON: In the final analysis, do you project receiving more revenue this year than last year on fuel tax, when you add them altogether? Yes or no.
MR. HOGG: I think the estimate from March 31st, for the fiscal year 1999-2000 versus 2000-01, the motive fuel tax revenues would have gone up. The actual numbers I can't recall but I would assume that they would have increased but how much, I don't really know, that is estimate to estimate.
MR. MACKINNON: Adding the motive fuel tax, the home heating fuel tax, every other tax associated with different types of petroleum products, will you have more money at the end of this fiscal year according to your projections? Obviously if you are tracking it on a monthly basis you would have a pretty good indication by now. We only have one month left in the fiscal year. Will we have more than last year?
MR. HOGG: Yes.
MR. MACKINNON: Approximately how much?
MR. HOGG: I can't really tell you that, other than the information I have provided already on gas and diesel fuel, which over a six month period, if you combine all of the taxes, it is about $1.6 million more. What is not in this equation is the home heating oil. We would have to go back and make an assumption of how much of the revenue change was due to HST on home heating oil.
MR. MACKINNON: Mr. Hennebury, would you be able to give us an estimate, since you are the director?
MR. BRUCE HENNEBURY: Mr. Hogg referred to the monthly reports we get from Service Nova Scotia. We don't track home heating fuel on a consumption basis, on a litreage basis because there is no provincial fuel tax on home heating fuel. We only track diesel and gasoline, so there is no way of determining actual consumption for home heating fuel at the end of the year. We have to make an assumption about how much might be used in the year and then do some calculations to determine how much HST might be applicable to that consumption.
MR. MACKINNON: If I could, just for clarification, through you, Mr. Chairman, are you saying that is the money that is rebated back from the federal government? The home heating tax?
MR. HENNEBURY: No.
MR. MACKINNON: You are not able to determine on a monthly basis, you don't see any of the money until . . .
MR. HENNEBURY: We are not able to determine, on a monthly basis, how much home heating fuel was used.
MR. MACKINNON: So you have no idea at this point approximately how much tax revenue has been generated through home heating?
MR. HENNEBURY: We can only make an estimate based upon . . .
MR. MACKINNON: That is what I was asking for, an estimate.
MR. HENNEBURY: . . . things like information from Statistics Canada on how much home heating fuel might be used in the province because there is no actual requirement for fuel companies to report the litres of home heating fuel sold because it is not taxed, there is no fuel tax on it, only HST. For HST purposes . . .
MR. MACKINNON: As a layperson perhaps you could guide me here. Where does that tax go? Somebody pulls up to my home . . .
MR. HENNEBURY: The HST . . .
MR. MACKINNON: Yes.
MR. HENNEBURY: . . . or the provincial fuel tax?
MR. MACKINNON: Yes, they put the fuel in our oil tank and we pay the bill, where does that tax dollar go, who collects it?
MR. HENNEBURY: The HST?
MR. MACKINNON: Yes.
MR. HENNEBURY: It is collected by Canada Customs and Revenue Agency on behalf of the province.
MR. MACKINNON: Then they divvy that up, the province gets a certain percentage and the federal government gets a certain percentage?
MR. HENNEBURY: That is right.
MR. MACKINNON: How often do they cut that cheque, so to speak, to the province?
MR. HENNEBURY: That is a fairly complicated answer because they don't remit directly the tax that is collected. It is based on an allocation formula that is agreed upon by the federal and provincial governments. It is the same in New Brunswick and Newfoundland, the other two harmonized provinces. The federal government makes remittances to us on a monthly basis . . .
MR. MACKINNON: How much?
MR. HENNEBURY: I don't have that figure right in front of me but I can get it for you.
MR. MACKINNON: Can you give an undertaking to the committee to provide that?
MR. HENNEBURY: Yes.
MR. MACKINNON: So you would know on a monthly basis approximately how much you would expect?
MR. HENNEBURY: We know on a monthly basis for cash purposes how much we get.
MR. MACKINNON: So it would be reasonable to presume you can project that based on the time of year and based on previous year's performance?
MR. HENNEBURY: That is right but it is important to remember it is not based on actuals, it is based on estimates that happened at the beginning of the year.
MR. MACKINNON: So, it wouldn't be that difficult to give an estimate of really what the revenue of that home heating tax is? If you receive that cheque on a monthly basis and you are doing projections . . .
MR. HENNEBURY: The cheque that we receive on a monthly basis is for the entire HST collected, it is not based on specific commodities, we don't do that. There are literally hundreds of commodities.
MR. MACKINNON: The cheque being received this year on a monthly basis, is it higher than last year?
MR. HENNEBURY: Yes, it is.
MR. MACKINNON: How much? By 10 per cent, 20 per cent?
MR. HENNEBURY: I don't have that right in front of me but . . .
MR. HOGG: I am just going to say two things, I don't have the actual math but on HST in our forecast, as I mentioned before, as of our last update we are forecasting $8.5 million more, so you could assume that there is $8.4 million more in HST revenues from all sources. To calculate how much might be attributable to home heating oil, you would have to get the data on how many litres of home heating oil were consumed, assume a price and then you could calculate a number.
Could I just go back a little bit and perhaps try to be helpful on how the taxes are collected? If you were to drive into a gas station and fill your car up, the owner of that gas station is required to report how many litres of gas they have sold and the tax is calculated based on the litres. But if you also go into the store and buy bread, milk or any other commodity, those
things are not tracked individually. The store owner adds up the entire taxable sales that they have in the month and that is the amount that is remitted, so, it is the entire basket of goods. If you could buy home heating oil at the gas station, that would have been included in that basket as well.
MR. MACKINNON: The fuel tax that is collected, I want to put myself in the perspective of the average Nova Scotian pulling into the service station. We are paying approximately 80 cents per litre, if you take all of the ups and downs this season, but on average, 80 cents. That is considerably higher than last year and even higher than it was the year before. Obviously, the province must be making a windfall somewhere but that seems to be downplayed a fair bit. That is a political observation and I wouldn't expect you to comment on that, Mr. Hogg or Mr. Hennebury. But with regard to the fuel tax, obviously that was initially set up for road construction, to maintain our highways. How much of that tax is being used specifically for road construction?
MR. HOGG: The motive fuel taxes are forecasted to be $220 million. I think the portion of the Transportation budget applicable to roads is in the $180 million to $190 million range.
MR. MACKINNON: So between $30 million and $40 million less than is being collected, is being used for road construction?
MR. HOGG: Yes, although in the numbers I am talking about, the cost to collect the taxes is not included in that. The $220 million is just the fuel taxes that come into the province.
MR. MACKINNON: My figures are right, then, between $30 million and $40 million less than . . .
MR. HOGG: Yes, if you make an allowance for the administration of the tax, the people that audit the returns and check on the consumption data, that sort of thing.
MR. MACKINNON: On a previous day, I believe, when you were before the committee, there was concern raised by the government caucus that we are not getting our fair share from the federal government. I don't like to beat around the bush, perhaps if you could address that directly, without getting into the political side of it?
MR. HOGG: There are two issues in your question. The first is the last discussion was around the federal sales tax and the numbers at that time - and they have changed, I believe, for the worst - is that the federal government collected in federal excise tax on fuels about $125 million or more in taxes. In terms of direct grants to the province or payments to the province with respect to roads, it was in the order of $4 million or $5 million, so there was quite a gap in those numbers.
The other issue in your question is that the assumption that gasoline taxes or diesel fuel taxes are in a sense a user fee and that all of them are attributable to a particular service of government. There are very few, if any, jurisdictions that set up their tax regimes in a way that
says, everything we collect on fuel is applied to roads or everything we collect on cigarettes is applied to health.
MR. MACKINNON: So it is at the discretion of the individual province, is that what you are saying?
MR. HOGG: In their broad tax policy they have to balance what is reasonable to charge on the various products, whether it is tobacco, liquor, gas, or whatever they might tax versus what they tax on people's income, versus what they tax on corporate income, to come up with a whole tax policy. There are some jurisdictions - I am not familiar with any in Canada, although they might exist - that specifically allocate a portion of their fuel tax or any other tax to a specific purpose.
MR. MACKINNON: Okay, I want to be clear on this. Are you suggesting that the federal government just provides x number of dollars and it is at the discretion of the province how they want to direct those dollars, whether it goes into road construction or building bridges or some other type of social program? Is that the federal-provincial arrangement that we are talking about?
MR. HOGG: No, I wasn't going down that avenue. What I was . . .
MR. MACKINNON: Is that regime in place, that I suggest?
MR. HOGG: No, the transfer payments that we get from the federal government come from three sources. They provide us equalization payments and the provinces that receive them are free to do with them whatever they wish. The other form of payments are CHST, I am not sure that there is an exact legal requirement that it be spent on health, education and social programs . . .
MR. MACKINNON: Where does the fuel tax fit in?
MR. HOGG: There is no transfer of federal taxes to the provinces. The federal excise tax that people pay on gasoline goes into the general federal tax revenues, it is not allocated to the federal Department of Transport and it is not allocated to any province. They take it all into general revenue and then during their budget process, they make an allocation to the various departments, including the Department of Transportation. The federal Department of Transport then determines through its cost-share programs, how much it would allocate to each province.
MR. MACKINNON: Mr. Hogg, what you are saying then, if I interpret you correctly, is that we are not able to specifically target whether the federal government is putting more back in fuel tax dollars that are collected or less, because it all comes in as a package under one of those three regimes?
MR. HOGG: It goes in as a package to the federal government. What we can calculate is the cost-sharing agreements that the federal government has with the province. That determines how much money the province gets from the federal government with respect to roads. We can also calculate how much Nova Scotia consumers pay in federal excise tax on gasoline.
MR. MACKINNON: But what we do know at this point is the provincial government is collecting more money on fuel tax this year than last year, correct?
MR. HOGG: Yes.
MR. MACKINNON: And they are not putting that full amount into the Department of Transportation and Communications? They are putting between $30 million and $40 million less for highway maintenance and road construction.
MR. HOGG: If you are talking strictly about highway maintenance, yes, the budget for the Department of Transportation . . .
MR. MACKINNON: That would have nothing to do with whether the federal government is putting more or less? It is just the fact that the province is putting less into that.
MR. HOGG: No, it would have an impact how much the federal government provides.
MR. MACKINNON: But the province - under one of those three regimes - has the latitude to direct those dollars as it sees fit. Is that correct?
MR. HOGG: Yes. The budget for the Department of Transportation and Public Works in total is about $250 million. They do a lot of various things and part of that is road construction.
MR. MACKINNON: I understand I have less than one minute. I understand our good Premier is meeting with the Minister of Finance today to try to get more money on this fuel tax issue and perhaps some other issues. I am going to table this document because I know all
members of the Conservative caucus would like to have it. It is an article (Interruption) It is authentic, it is from one of our local papers and the title is, Tories tackle Hamm over heavy taxation. The Premier tells his Conservative delegates he is not in a position to do anything to help out with the high fuel taxes. Is the province in a position to provide any type of relief to the homeowners on the high cost of home heating fuel?
MR. HOGG: Financially, the province is not in any shape to provide anything more, compared to what it is spending now. There is - as was referred to earlier - a rebate program in effect but the deficit and debt of the province really limit what the province can do in terms of providing any increased tax relief to consumers. If you look across Canada, I think you will find that the provinces that have provided tax relief, whether it is on personal income taxes, or on consumption taxes, or on fuel taxes, it most notably would be the federal government and Alberta. That is probably due as much or more to their surplus position than it is to any kind of public policy decision.
[8:49 a.m. Mr. Russell MacKinnon resumed the Chair.]
MR. CHAIRMAN: Thank you, Mr. Hogg. We will turn our questioning over to the Conservative caucus, Mr. Brooke Taylor.
MR. BROOKE TAYLOR: Mr. Chairman, I would like to thank the gentlemen for coming in this morning. I wonder if you could reiterate the provincial fuel tax rate that is applied to the price of gasoline and the provincial fuel tax that is applied to diesel fuel? I have heard different stories, 13.4 cents and 10 cents, and I just wondered for clarification if we could perhaps understand the rate, Mr. Hogg.
MR. HOGG: If we start with gasoline, included in the price of gasoline - and these are fixed taxes regardless of the price of gasoline - 10 cents is a federal excise tax. So for every litre of gasoline you buy, 10 cents is the federal excise tax and 13.5 cents is provincial tax. So for every litre of gasoline, 23.5 cents is taxes; 10 cents federal and 13.5 cents provincial. For every additional litre of gasoline sold, there is 23.5 cents more paid and for every litre less sold there is 23.5 cents less collected. On top of the total sales price, there is HST which would mean if a litre of gasoline costs $1.00 then the price the consumer pays is $1.15 because of the HST.
MR. TAYLOR: Can I just ask a question, Mr. Chairman, on that particular point before we get into diesel fuel, and I am sure there would be a formula that holds true. As consumers claim - and it is not just unique to this government - in fact, the HST is applied to the other two taxes after they are added to the unit price?
MR. HOGG: That is correct.
MR. TAYLOR: And on diesel the federal excise tax is 4 cents?
MR. HOGG: Yes.
MR. TAYLOR: And the provincial tax is?
MR. HOGG: It is 15.2 cents. If you compare gasoline and diesel, in the case of gasoline we have a fixed tax of 13.5 cents and in the case of diesel it is 15.2 cents. On diesel fuel there is also HST applied. One thing that sometimes gets lost in the discussion is that 98 per cent or higher of all litres of diesel fuel consumed is consumed by commercial operators and under the HST regime they are eligible for a rebate of the HST portion that they pay. There is not a lot of HST revenue from diesel sales. It ends up at the end of the day with the provincial government.
MR. TAYLOR: Perhaps we could focus a little bit of our attention on the federal government. During the course of the federal election campaign - it was stated in some documents we have been provided with, I think all colleagues on the Public Accounts Committee have these particular documents - apparently the federal Finance Minister was intimating that he may consider dropping the federal fuel excise tax by 1.5 cents. That was during the course of the campaign and again, that has been publicized. Has your department had any dialogue with the federal government?
We indicated earlier that the feds rake in about $125 million a year - I think, Mr. Chairman, you raised that concern when you were placing questions to our witnesses - and I question that, I think it is more than that. We have been saying for a decade that the feds take off about $125 million through federal fuel excise tax. Nova Scotia Forest Products Association, for example, suggests that that is closer to $130 million. I don't know if we have any way of verifying that but they did some number crunching. Anyway, it was a considerable amount of money and I am interested whether you, Mr. Hogg, or your department has any idea as to whether or not the federal government is actually going to follow through with that promise they made to reduce the federal fuel excise tax?
MR. HOGG: In meetings with federal officials and the ones attended by Paul Martin, he hasn't raised the prospect of reducing the federal excise tax. I don't recall seeing the reports that you mentioned, in terms of excise tax. I do recall a discussion about reducing a portion of the taxes - I assumed it was HST but probably your recollection is better than mine in that it would have been on the excise tax. I think the federal government believes that through its GST rebate for home heating oil, that they have addressed what they saw as the problem. We haven't heard anything further from the federal government in terms of excise reductions for diesel or any other fuels. The federal government is very good at guarding its revenues so they don't give them up very easily and in part, that is why they have a $3.5 billion surplus.
MR. TAYLOR: Yes, according to this document - I apologize, I will find it a little later, I hope - the federal government in Ottawa is bragging that when they introduced the 1.5 cents - apparently in 1995, the federal fuel excise tax went up 1.5 cents per litre to help the feds in an admirable quest to reduce the deficit - allegedly that deficit had disappeared, by all reports, two years ago. If it was put in as a temporary measure to reduce the deficit, the deficit is gone, then I would trust that perhaps the provincial Department of Finance in this province, and hopefully in all provinces, will pressure the federal Minister of Finance to follow through on that
commitment. It would be a small relief, yes, but the idea was to put it in as a temporary measure. Is that your understanding when it went up 1.5 cents, that it was just to be short term?
MR. HOGG: Yes, as I get older my memory fails me a little bit but I recall quite vividly now, when I was in an earlier portfolio, Transportation and Public Works, that there was a proposal from the provinces, pretty much to the effect as you described, that 1.5 cents of the excise tax was put in place - I don't recall the year - and tied to fighting the deficit. One of the proposals from the provinces was dedicating or allocating that 1.5 cents, if they were not going to remove it because the federal government had a surplus, to dedicate 1.5 cents of that tax to road construction through road grants to the provinces. As I mentioned before, the federal government is very cautious about its revenues and they did not at that time, and haven't given any indication that they would, remove that 1.5 cents and they haven't given any indication, other than in a modest way, that they would allocate a portion of that 1.5 cents to grants to provinces for road construction.
MR. TAYLOR: In Nova Scotia we have been on a roller coaster, relative to gas prices, I don't think anybody would dispute that. Earlier we talked about natural gas and I guess the fact that it is in Nova Scotia, at least, at this point in time it is not widely used. I am just curious as to whether or not anything has been worked out yet on the - I'm not sure of the name of the fund, Mr. Chairman, but there was negotiated in 1997 a $20 million - I will call it for lack of a better word - natural gas conversion fund or rebate fund. Is there any formula relative to residential and small business, regarding that particular fund yet?
MR. HOGG: I don't believe the criteria has been established yet. My understanding from the Petroleum Directorate is that the monies have gone into the fund and that they are developing the criteria as to how they would utilize that fund. I believe the idea was, as you mentioned, because natural gas is a new fuel in Nova Scotia - people are not familiar with it and don't necessarily have equipment that can use it - that, in part, the fund was established to make it easier for that transition to occur but I have not seen the criteria that they would be using for allocating that fund.
MR. TAYLOR: Thank you. Something else that, I guess, makes one wonder about the whole issue of fuel prices is the fact that the refineries - Imperial Oil, for example, is boasting about raking in record profits. Now, Mr. Chairman, I am not against companies making a profit but as Mr. Hogg indicated earlier, the prices that this government and previous governments - the fixed prices that are in place really do not generate any additional revenue if, in fact, your overall sales are down, as in the case of gasoline, 2.8 per cent. Diesel, I guess, is up, maybe, 1.6 per cent.
It certainly makes one wonder about the prices, whether or not, in fact, some of these - you know, it seems like as soon as there is an announcement that OPEC has cut production, the pump price jumps up and on rare occasion, we hear that the crude price - you know, OPEC has increased production, agreed, but very slowly, ever so slowly, you know, the price comes down.
I have little difficulty understanding how Imperial Oil, for example, can continue to boast about raking in annual profits and so on and so forth. I know that is not in your area of expertise but it is still a concern out there, to me, that there is no justification - I shouldn't say mechanism - and I'm not saying the prices aren't justified - I question whether or not they are, in fact - but there is no mechanism and that is a different area.
MR. HOGG: If I might just add a comment to that. There have been a number of studies and commissions, and some of them are in the binder dealing, in part, with the issue that you are raising. You would certainly need someone more expert than me but an earlier question referred to the profits that Exxon, some of the major companies, are making. The industry is very vertically integrated. That is, they can, if they choose, arrange to take their profits in different areas, whether it is through exploration, wholesale sales or through refineries and, in some cases, right down to the gas station.
It is a very complex area and there is a lot of restructuring happening with refineries that is having an impact on prices, and from what I have read, a shortage in fuel which causes an increase in price, is due to refineries reaching their maximum capacity because of reduction in smaller refineries that's happened over the past decade.
MR. CHAIRMAN: Mr. Barnet.
MR. BARRY BARNET: Mr. Chairman, I would like to just slightly shift gears a bit, if I could. I imagine all members of this committee and members of this Legislature have heard from constituents about the high cost of gasoline, diesel and home heating oil. One of the issues that people bring up to me, time and time again, is the fact that, in their opinion, government has the ability to do something about that by simply reducing the amount of tax collected. That would then reduce the cost to consumers.
I have done a little bit of cross-referencing. I have taken the sheet from the binder that we have which shows comparative tax rates as of April of last year across this country. It clearly demonstrates the amount of cents per litre collected by each and every province. Then what I have done is I have cross-referenced that with January 23rd's price per litre. What you will find, Mr. Hogg, and members of the committee, is that in some circumstances, lower tax does equate to lower cost at the pump. But in other circumstances, where provinces have a higher tax, in fact, it is not the case. I will point out a couple of examples.
The first example that I want to point to is Prince Edward Island. Prince Edward Island charges 13 cents per litre of tax and the Province of Nova Scotia charges 13.5 cents. Now, at that point in time, the cost per litre in Prince Edward Island was 79.4 cents for regular, unleaded gas. At the same point in time, the cost in the Province of Nova Scotia was 77.6 cents. So you will see that, clearly, even though we had a higher rate of tax we had a lower cost of gas. So it doesn't necessarily equate to the fact that you can use one or the other. Now, to go to the other extreme, for example, Ontario's tax per litre is 14.7 cents. That is 1.2 cents higher than ours. Yet, their gas price is 74.6 cents, significantly lower.
My point is, and my question is, if we were in a position as a province to lower the tax on gas - and we all know here that we are not, that we are continuing to face deficit budgets, but if we were - there is absolutely nothing in the province's ability, except complete regulation of the industry, to make sure that that saving is passed on to the consumer. I would suspect that is with any commodity that is bought and sold. Is that your opinion, as well?
MR. HOGG: I would agree with that but, in particular, with petroleum products and with gasoline and diesel fuel, it is a very competitive market and I hate to use the words, oil companies and sympathy in the same sentence, but most of the sympathy rests with the small retail gas station who has very small margins. All of the various layers tend to pressure each other to squeeze out as much profit as they can. So whether it is taxes or whether it is another cost factor, if that is removed, well, it is proven that it doesn't necessarily follow that that exact same cost avoidance gets translated into a retail price.
The point that you made, I think, illustrates what might have a greater impact on price and that has to do with volume and competition. If you look at Ontario, the amount that they consume and the competition, in terms of competing gas stations and the number of refineries they have, probably slightly better correlates to the price of fuel than the tax amount.
MR. BARNET: I would agree with that. In fact, I had the opportunity this summer to make a trip across the country and what I have noticed is that as you come closer to larger centres, the price comes down, and the further away, the price goes up. I think that was the same, both in Canada and the United States.
I know that Prince Edward Island is the only province in Canada that regulates its fuel. There is some talk and discussion that Newfoundland is looking at, potentially, some form of regulation. Considering the fact that for the last couple of weeks, Prince Edward Island's price at the pumps has been higher than ours and higher than all provinces, except for Newfoundland, there has been some concern by the public saying that if it is a regulated industry, then the consumer will be protected. My question is, is there any advantage or disadvantage to the government from a revenue perspective to a regulated or non-regulated industry?
[9:10 a.m. Mr. James DeWolfe took the Chair.]
MR. HOGG: It has been some time since I have seen the actual comparison but I did see a multi-year comparison of Nova Scotia fuel prices with P.E.I. fuel prices and, on balance, the prices in Nova Scotia were lower than they were in Prince Edward Island.
I am not an expert in regulation of fuel but I have had conversations with Finance officials from Prince Edward Island and what they report is, rather than the erratic spiking that we see in our prices, where prices can change any time during the run of a day, that what regulation brings is a stepping of fuel prices because they approve them whenever a proposal is put forward by one of the companies.
What happens is that if fuel prices are going up, then there is a 30 day delay in getting their application for a higher price approved and in place. If prices go down, there is a similar delay in having that reduction approved. Whether you benefit or not, taxwise, probably has more to do with just the timing of those steps versus the very erratic ups and downs that are experienced on regulated market. Back when I was with Natural Resources, I did see an analysis but I don't know whether that has been conducted again or how it stands.
MR. CHAIRMAN: Okay, thank you, gentlemen. That ends the first round. We will commence with the NDP caucus, as before. We will have 15 minute rounds, please. Who is going to take the lead? Mr. Dexter.
MR. DARRELL DEXTER: Mr. Chairman, I just want to start with a little review of what you have already told us, just so that I am clear on the information that you have been providing us. The state of play today is that you don't know what the consumption of home heating oil is in the province on a monthly basis. Is that an accurate statement?
MR. HOGG: As I sit here today, no, I can't tell you how many litres of home heating oil were consumed. That's correct.
MR. DEXTER: Okay. You don't know - and when I say you, I am talking about your office - your office doesn't know on a month over month basis how much home heating oil is being consumed in the province?
MR. HOGG: No.
MR. DEXTER: Okay. I understood Mr. Hennebury to say that because there is no provincial tax on home heating fuel, you don't track consumption in the province month over month. Is that true?
MR. HOGG: I should not assume where you are going but the earlier question was that I was going to end up with a no answer and that wasn't where I was going. I just wanted to make everyone aware that the accuracy of any analysis of home heating oil does not have the same quality as it does on gasoline and diesel. In order to get consumption data on home heating oil, you have to get it from another source which is not as reliable as the monthly reports that we get on gasoline and diesel fuel.
MR. DEXTER: I want to follow that thought for a second. The other unreliable source that you are talking about would be the federal government. That is where you are getting that data. Is that right?
MR. HOGG: That is correct, Statistics Canada. They get it from manufacturers and some assumptions about heating sources that they also get from the surveys that they carry out for statistical purposes. So the . . .
MR. DEXTER: Now, I find that quite astounding, really, that you don't have a truly accurate read of the consumption of home heating oil in the province. I was just looking at a gasoline bill that I had in my wallet. Clearly, in each bill, it lays out the quantity that is purchased at the pump. My recollection from buying home heating fuel is that the same thing is done on each invoice that is issued.
I assume, when they report their sales and, therefore, the amount that they have to remit in HST, that they remit both of those figures, the quantity sold and the HST that has been collected. Is that not the case?
MR. HOGG: No, that is not - that is the very difference that I am trying to point out, is that on gasoline and diesel, the way you describe is what happens. On HST, whether it is heating oil or any other sales process, the way tax is collected on HST is on the gross sales of the company. So you may have a home heating company that sells home heating oil; they might sell furnaces; they might sell burner services, as well. At the end of the month, they add up all of the revenue that they have taken in from all sources and they calculate the tax on that total amount.
MR. DEXTER: I understand that. Are you telling me that they do not provide the provincial government with a breakdown of those services and they do not say, I sold X number of gallons of home heating fuel? Are you saying that information doesn't go forward to the federal government?
MR. HOGG: It doesn't go forward on the HST returns. There are other reporting mechanisms, which I am not familiar with, through Natural Resources or Statistics Canada, or through the industry organizations which is where you would get the home heating oil consumption data, but it would not be from the tax records.
MR. DEXTER: So it is not on the HST reporting form, is what you are telling me?
MR. HOGG: Correct.
MR. DEXTER: Okay. Now, whenever the federal government collects its HST, it wants to have some confidence that what it is collecting fairly represents the services that are being provided, that they are getting what it is that they are due.
So the federal government, I assume, would routinely carry out audits of the retailers - to benefit the retailer too, to make sure that they are not over charging. I suppose that is hard to believe that that is a government function. That, I assume, is part of the service that is provided by the federal government in its collection of the tax. So, surely to goodness, the federal government has fairly reliable estimates on a month over month basis of what it is collecting in HST from home heating oil?
MR. HOGG: The question would be better put to the CCRA but from my understanding of how they collect the data they would not have the litres of home heating oil in the way that
you described. The way that they would get that data would be through the sources that I mentioned before.
The audits and the compliance that they undertake, that the Canada Customs and Revenue Agency undertakes on behalf of the Atlantic Provinces, at least, is that they do it on an exception basis, on the basis of audits. For the companies that they audit in the course of doing their calculations in their working paper files, they probably would have the actual litres consumed, but that is only for that particular company that they selected. It is not for the entire population. So for tax purposes, there is no tax purpose to collect the litres of home heating fuel sold or consumed.
MR. DEXTER: I realize it is somewhat technical and, perhaps, dry, but I do want to move a little further down in that examination because it seems to me that in the collection of the HST - and you have said it is remitted to you on a global basis, as I understand what you said - but you don't just get a cheque from the federal government and say, oh, look, this is our HST rebate for the month and we accept that that is the correct figure. You must go back and look at that amount and say, we have to audit this and make sure that we are getting what we are due. You must do that.
MR. HOGG: We do that but perhaps not in a way that you might think. We don't duplicate what the Canada Customs and Revenue Agency does by going back to individual businesses, doing audits and recalculating. What we do and what the federal government does as well, is look at the major factors which have more of an influence on how much HST we collect than any one commodity. But we look at factors such as the growth in GDP, in personal disposable income, consumer spending. Those are the things that give you your overall global HST number, rather than going to individual commodities because the list of individual commodities probably has no end. You would have to do it on chocolate bars, on just about everything, which gets into the volumes that are sold there, the prices and all those sorts of things. It is done on a global basis of how much is in the economy that could be spent on taxable items and then the taxes derived from that.
MR. DEXTER: I understand that, Mr. Hogg, but I guess what I don't understand is that we have - you know, the domestic energy market and the domestic energy consumption of a province is a fairly important thing to know for a provincial government, is it not? Wouldn't you request, at some point in time in your exchange with the federal government, a report that would break out what it is that is being consumed in the province, in the way of home heating fuel, in the way of diesel fuel, in the way of gasoline? Wouldn't that be almost a fundamental question that you would ask the federal government in order to be able to have a fair picture of what is going on in the province?
MR. HOGG: The federal government has no more current data - if we are talking about home heating oil - on home heating oil usage than we do. Their information is still delayed because it is not submitted on tax forms. What is crucial is the information that flows through in the calculation, for example, of the Consumer Price Index. Those price changes are what is a better determinant of how your HST revenues are going to change, rather than consumption or some other factor.
The federal government, even in their own process, they collect statistical data for statistical purposes but for tax purposes, everyone uses the same formulae to come up with their estimates of revenue.
MR. DEXTER: Well, I am sure that many people there today, much like myself, don't understand the relationship between the federal and provincial governments, in terms of determining what tax ought to come to the federal government and what is retained by the federal government. It seems to me it is always lost in a complex series of formulae and maybe necessarily so.
I want to go through - I don't know, Mr. Chairman, how much time I have left?
MR. CHAIRMAN: You have until 9:27 a.m.
MR. DEXTER: Okay, so I have a few minutes.
However, there is a calculation that many people do understand. I want to just walk through it. I have, in front of me, the presentation that you made to the Standing Committee on Economic Development. Part of that is retail home heating fuel prices and taxes, cents per litre graph that you provided.
What you indicate between 1999 and February 2000 - it doesn't say which month in 1999 but I am assuming it must be an average for 1999 - the price, including tax, per litre was 37.3 cents in 1999. It went to 56.8 cents in February 2000. The difference per litre is 19.5 cents. Now, that is an increase that people understand. If you look at a 900 litre tank, that price is $171.50 (Interruption) That is the increase, $171.50; 8 per cent of that is $13.72. That means that on every fill-up of every oil tank in this province, the Government of Nova Scotia received an extra $13.72. That doesn't count the federal portion. That is what the provincial government received.
Much like my friend, the member for Sackville-Beaver Bank, when I go out door to door, senior citizens say to me, they keep telling me that they want me to stay in my own house but they are doing everything in their power to put me out of it. The first thing they point to is the increase in the tax portion on home heating fuel.
Now, I guess my question on this is, that calculation is correct, is it not?
MR. HOGG: Your math is correct, yes.
MR. CHAIRMAN: Thank you. The Chair will now recognize a member of the Liberal Party, Dr. Smith.
DR. JAMES SMITH: Thank you, Mr. Chairman. I will be brief. I just want to say I have enjoyed this morning, this talk about regulation and deregulation, and the relationship between the federal and provincial government.
It was interesting, speaking in terms of fuel tax and the relative cost between the federal and provincial. We have seen a separation of the federal and provincial income tax that has probably seen Nova Scotians receive, approximately $5 million less benefit from that. So, really, I guess, in listening to some of the debate this morning, you would wonder, really, if the province really wants the people of Nova Scotia to know how much extra they are getting on the fuel tax. I think the math of Mr. Dexter here, really would demonstrate that.
I did want to ask the committee - I was taken with other matters for a moment but I did hear something about Mr. Martin, the federal Finance Minister, proposing to reduce taxes on
fuel tax. I wonder, does the committee have any information on that? Would the honourable member table that information? It is my understanding that he had alluded to the fact that he would agree to meet with provincial Finance Ministers, or whomever would speak for the province on that and discuss matters, as looking at a joint venture. We have no evidence that Mr. Martin has said that he would unilaterally reduce taxes on fuel. Would the honourable member table for the committee (Interruption) oh, he's saying it's in our book.
MR. CHAIRMAN: Yes, Mr. Taylor, I recognize your point of clarification.
DR. SMITH: His research, is he using the media again, as research.
MR. TAYLOR: On a point of clarification, Mr. Chairman. I believe the honourable member for Dartmouth East has been provided with the same documents I have. If he would just take time to research through his information, he will clearly find that the Finance Minister is quoted as saying that the tax was increased by precisely that amount, 1.5 cents in 1995, as a specific and supposedly temporary deficit-fighting measure. The deficit disappeared two years ago. This is his federal Liberal colleague.
Moreover, a federal government boasting of a $12 billion surplus with revenue from the Goods and Services Tax on the rising gasoline price that more than offsets a small reduction in excise tax. This article was in The Daily News, September 24, 2000 and it is in your package, honourable member. Have an opportunity to look at it. Thank you.
MR. CHAIRMAN: Thank you for that point. I see no need to table that since everyone has that in their possession. I will add one minute to your time, for the Liberal caucus.
DR. SMITH: I thank you and thank you for the minute. It is most generous. Yes, I assume he was getting his information from that and I do have that information in my folder.
I would ask my colleague to follow up. He has some other questions that we would like to ask.
MR. CHAIRMAN: Mr. MacKinnon.
MR. MACKINNON: Thank you, Mr. Chairman. I am not sure if our colleague for Colchester-Musquodoboit Valley saw his shadow last week or what happened.
I was also somewhat interested in the comments by the member for Sackville-Beaver Bank in his inference that the only way we would really be able to protect the consumer is by regulating the industry. I think it is only befitting that we recall back in February 1991, that issue was raised. In fact, it was a member of the Conservative Government that advanced the cause of deregulation, it was the Minister of Industry at that time, the Honourable Donald Cameron, who brought that issue before the House and that is how we ended up with deregulation. He believed we should have less protection and more competition in the province.
Perhaps there is a new Conservative philosophy about here but we will wait to see whether that happens or not.
I would like to table this particular document, it goes back to the issue of fuel tax. As we know last year the provincial government had a rebate program for seniors and low income individuals and a new program again this year. The federal government implemented a similar program and they refer to it as an ex gratia payment, with less restriction, I suppose, than the province. First of all I will table this memo dated February 2, 2001, if the Clerk would be kind enough to provide a copy to all members of the committee and indeed to the deputy minister so I can question him on this particular issue. It is with regard to the federal government's rebate for heating expenses.
I noticed that the province - in this memo signed by the Executive Director for Community Care Branch, Department of Health - is stating, "The Government of Nova Scotia is reviewing the appropriate disposition of these funds." In other words, the province is trying to withhold all these cheques belonging to seniors who reside in any type of a nursing home. Has there been any discussion with the Department of Finance on the implications of this particular memo?
MR. HOGG: There haven't been discussions on this memo. The only discussion surrounding an issue even related to this is that the federal relief program was very broad and indiscriminate in how they provided their rebates.
MR. MACKINNON: Were you aware of this particular memo?
MR. HOGG: I heard it was raised in the media yesterday or the day before, I think it was yesterday.
MR. MACKINNON: But you had no knowledge of such an initiative that would have an impact on the finances of the province? There was no discussion with the Minister of Finance?
MR. HOGG: There may have been discussions with the minister but I wasn't present.
MR. MACKINNON: But the memo does state, the Government of Nova Scotia is reviewing . . .
MR. HOGG: Yes.
MR. MACKINNON: Do you have any opinion on the appropriateness of such a memo, given the fact that they are not provincial dollars and there is no federal-provincial agreement in dealing with this particular issue, is there?
MR. HOGG: I can't really comment on it other than as I mentioned before, the federal relief program was very broad and very - how can I describe it? - indiscriminate. The only criteria was the income criteria. It didn't relate - even though it was described as a relief for heating expense - to whether people actually had an expense, whether their heating expenses had changed or not.
MR. MACKINNON: Would you have any idea as to what the financial implications for the province would be if all of those cheques were withheld from those seniors?
MR. HOGG: No, it would be a calculation of - if I understand this memo correctly - the number of residents by the amount of the cheque but I don't have any information on that.
MR. MACKINNON: I think that is quite concerning given the fact that back on January 25th the Conservative caucus put out a press release stating the Liberal caucus was fearmongering and making inaccurate and inappropriate statements with regard to this Fuel Assistance Program. Yet here we have documentation from the government stating, in fact, that what the Liberals were saying was accurate. It is ironic, as you stated, Mr. Hogg, since the issue did come to the public's attention, the provincial government has done some back-pedalling in the last number of hours.
When I received notice on this I took the liberty of contacting the Minister of Finance's office in Ottawa. I can assure you that they were quite disturbed by the actions of the province in trying to take this fuel rebate cheque. They realized the program wasn't perfect in its application, but it was certainly designed to help the poorest of the poor and those that needed help the most. I would ask you, Mr. Hogg, if you would raise this issue with your minister later today and perhaps he could counsel the Premier on this, prior to his meeting with the Minister of Finance later this afternoon, to be able to address the rather strange dichotomies that are happening within the provincial Department of Finance and Department of Health? Would you give us an undertaking that you would raise this with the minister?
MR. HOGG: I will provide this memo to him, yes.
MR. MACKINNON: We are hearing lots of crackles from the government caucus now that they have been exposed, Mr. Chairman. In 1999, they took from charities and in the year 2000, they pitted the working poor against the poor, now in 2001 they are taking from the senior citizens.
MR. WILLIAM LANGILLE: Mr. Chairman, on a point of order. This member of the Liberal caucus is off base completely. Get him back on track, please.
MR. CHAIRMAN: The point will be taken under consideration. Mr. MacKinnon. (Interruption)
MR. MACKINNON: If the honourable member for Colchester North had read the memo, it deals specifically with the rebate on heating expenses. If he doesn't find a correlation
with that particular memo to the issue that we have before us today, then I would suggest it is little wonder that the seniors in this province would be upset.
Mr. Chairman, I'm not sure whether this question would be appropriate or not, but perhaps if the deputy minister would be kind enough to raise with the minister, as well, and perhaps have the minister report back to the committee, if possible, as to whether the Minister of Finance directed the Minister of Health to institute such an action? Obviously, such an action is a financial issue, moreso than an individual one. It is not a Department of Health issue, we are dealing with the home heating rebate program that the federal government instituted, so obviously it is a financial issue. Would the deputy minister be kind enough to secure an answer or at least give an undertaking to the committee that he will seek clarification from the Minister of Finance as to whether he directed the Minister of Health to allow officials within the Department of Health to institute such a memo or directive?
MR. HOGG: I really don't feel I can speak for the minister on this matter. I will provide the letter to him, I don't know whether he has seen it or not but I really don't think I can commit the minister to do anything. I will provide him with the memo that you have given me.
MR. MACKINNON: Mr. Chairman, I find that a bit concerning because if we listen to the media reports this morning where the minister is stating that the seniors can, to paraphrase, temporarily keep this rebate cheque from the federal government. In the name of good heavens, the provincial government has no business whatsoever tampering with cheques that are issued by the federal government to the senior citizens of this province. I think if not morally wrong, it would certainly be legally wrong. That is certainly an issue that would have to come from within the Department of Finance, not singularly within the Department of Health because the memo clearly states the Government of Nova Scotia. It doesn't state the Department of Health, it says the Government of Nova Scotia.
Again, I would ask that we receive some clarification from the Department of Finance as to really what is the intention of the Minister of Finance in dealing with this rebate program for the seniors of this province, irrespective of whether they are renting in a senior citizens' complex, a nursing home or indeed a private institution because the terms of reference of that federal program are laid out and they are not to be interfered with by the Province of Nova Scotia. It is very concerning that we just have the Minister of the Crown, the Minister of Finance, or perhaps the Minister of Health saying the seniors can temporarily keep the rebate. Does that mean that they are going to claw it back on a future day? Does that mean that it is going to be assessed against them as some liability? These are very important issues and I would ask if, perhaps, since it is tied into the fuel tax rebate program that this issue be dealt with in a forthright manner. Thank you, Mr. Chairman.
MR. CHAIRMAN: Mr. Hogg, do you wish to reply to that? (Interruption) Okay, thank you. The time has expired for the Liberal caucus and I will now turn to the honourable member for Colchester North, Mr. Langille.
MR. LANGILLE: Mr. Chairman, today there have been allegations in the papers and in the media, in the Legislature, about the huge windfall on the HST. I would just like to clarify that the HST was an election promise for the Chretien Liberals. Now at that time, there were three provinces that were Liberal that all caved into Mr. Chretien's promise and they were Nova Scotia, New Brunswick and Newfoundland. So that is why Nova Scotia has the HST. I just want to clarify that for the Liberal members who are here today.
Having said that, also the taxes collected by the federal Liberals on the fuel tax amount to $125 million a year of which we are getting a measly approximately $5 million back from that sales tax on the backs of the people of Nova Scotia. Having said that, the gasoline sales last year to October 31st were down 2.87 per cent and that is of 1.23 billion litres. The provincial sales tax of that is 13.5 per cent. What does that mean in a loss of revenue, that 13.5 per cent of the 2.87 per cent decrease in gasoline sales?
MR. HOGG: For the period that I performed the calculation, that would be for the six months ended September 2000, because of the decline in consumption, we would have collected $2.4 million less than what we did collect for the six months ended September 1999.
MR. LANGILLE: Also, there would be HST not collected on that volume either. Is that correct?
MR. HOGG: That is correct, yes.
MR. LANGILLE: How much would that be?
MR. HOGG: I haven't done that specific calculation but I would refer you to my letter of December 19th and the gasoline tax went down by about $2.5 million so the HST loss on the decline in consumption for the province would be 8 per cent of $2.5 million but I didn't perform that calculation and it is just off the top of my head.
MR. LANGILLE: Factoring that in and the windfall then, those decreases in the provincial sales tax and the monies not collected from the HST on the increase in gasoline, what are you looking at for a net income there?
MR. HOGG: If you were just to look at the provincial gasoline tax and the losses for consumption, it would probably be in the area of about $2.6 million or $2.7 million but I think there is a more comprehensive set of numbers in my December 19th note but the decline in consumption has an impact on the gasoline tax that we collect and also, as you point out, the HST is not collected on the litres of fuel that aren't sold as well.
MR. LANGILLE: I just wanted to touch on the diesel fuel. The diesel went up 1.6 per cent and as a colleague from the NDP said, that is probably due to an increase in the economy, which I would tend to agree, for commercial. Also, the commercial, which accounts for 98 per cent of the diesel consumed in Nova Scotia, they get back an HST rebate. Is that correct?
MR. HOGG: Yes, they do.
MR. LANGILLE: That would leave 2 per cent, of course, that don't. So there is no windfall certainly on diesel fuel, is that correct, on the HST?
MR. HOGG: That is correct because the majority of it gets rebated back through the commercial users so the number of litres consumed by consumers who aren't eligible for the rebate is a much smaller base to work with so over a six month period the HST gain, because of price increases, is in the $80,000 range.
MR. LANGILLE: Thank you very much. I will turn it over to the member for Colchester-Musquodoboit Valley.
MR. CHAIRMAN: Mr. Taylor.
MR. TAYLOR: Thank you and quickly, if I could digress, Mr. Chairman, for your benefit, I would be more than willing to take you out and introduce you to Shubenacadie Sam. He is a constituent of mine at the wildlife park. You talked a little earlier about me seeing my shadow and I know Shubenacadie Sam didn't see his. If there is an opportunity, we will just see down the road who is the best prophet, him or me. But I would like to take you out, if I have the opportunity.
On a serious note, Mr. Chairman, I am quite disappointed that you and your Liberal caucus are so prepared to let your federal colleagues off in Ottawa, especially Finance Minister Martin. Here they are sitting on what truly is a surplus. It has been proved here today, time and time again and reconfirmed what we have been saying all along, that we are in absolutely no position to lessen the fixed taxes. They have not changed. They haven't changed the fixed taxes on gasoline and diesel fuel, the provincial portion, but I would think that you, Mr. Chairman, and your colleagues would support this committee and their efforts to pressure Ottawa, Finance Minister Martin, to reduce the federal fuel excise tax. It is highway robbery what they are doing, Mr. Chairman. I think your caucus is aware of that but to challenge us and to challenge the media on statements they have made, I think that that is almost reprehensible.
With that I would like to, if I could, pass my turn along to my honourable colleague, the member for Chester-St. Margaret's, Mr. Chataway.
MR. CHAIRMAN: After those very complimentary remarks, I will recognize the honourable member for Chester-St. Margaret's.
MR. JOHN CHATAWAY: I appreciate, I suppose . . .
MR. CHAIRMAN: Perhaps if the honourable member would be kind enough to stand so the cameras can pick him up for Hansard recording purposes.
MR. CHATAWAY: Mr. Chairman, basically this is concerning what you have just given out, concerning a federal government rebate for heating expenses cheque, I think the most interesting thing on that is the fact that it doesn't seem to indicate what percentage of the rebate is available, if it was $1.00 or $100, whatever, it would be very nice. Certainly I think it would not be a difficult time to find out what the size of the heating bill was for homes for special care. We also realize that homes are having I think a worse year than say last year or other years. They may very well appreciate any help in this regard. I think it would be very nice to know what size of a rebate it was. Maybe you say well this is a wonderful thing to do but unless they actually tell how astute this is, homes for special care, et cetera, will be far more interested. I thus just ask the question, Mr. Hogg, if you know that.
MR. HOGG: The method by which the government chose to implement their relief program was to use the GST Rebate Program which has been in existence since the GST was introduced some years ago. They selected a flat fixed amount that they would return or that they would pay to everyone who received a GST refund. I believe the amount of $125 goes to anyone who gets a GST rebate cheque. So that is my understanding of how the program works. So if you qualify for a GST rebate, then you should have received or will shortly be receiving the $125.
MR. CHATAWAY: I think certainly the people who are supplying the heating should be aware of this that maybe it could relieve the problem there.
MR. HOGG: I mentioned in answer to an earlier question that - I am not making a judgement on the program, I am just pointing out that the federal program was indiscriminate in that the only criterion they used was whether you qualified for a GST rebate or not. It wasn't tied to whether you actually spend money on heat or whether your heating costs changed or went up. It was just a very broad-based program - possibly for ease of implementation, I don't know - based on the GST rebate, not really tied to heating costs in any direct way.
MR. CHAIRMAN: Mr. DeWolfe, one final question.
MR. DEWOLFE: Mr. Chairman, I guess on a lighter note, first of all I want to thank you very much for coming here today. It was most interesting. I represent the unfortunate group of 2 per cent who drive diesels and are non-commercial. I would like to know why diesel is, in your mind, so high, considering it is up there now in line with the cost of a medium-grade gasoline and there is very little value added. It requires much less refining and I am just wondering what your thoughts are on that.
MR. HOGG: Many times we try to equate the price of any good with its actual cost. The actual cost has very little to do with the price of the commodity. I think the price of diesel fuel is, as they say, whatever the market will bear. Unfortunately, if you use, in this case diesel fuel for your own personal car, the industry may have seen that the pockets of the commercial drivers might be a little deeper than consumers so that might be a factor in how they set their prices. Eventually, prices are equated back to cost but when they are actually set, it is more to
do with competition, demand, how much demand reduces once a price reaches a certain threshold. I can't be any more scientific or sympathetic than that on the price of diesel fuel.
MR. DEWOLFE: Thank you.
MR. CHAIRMAN: One final question, Mr. Taylor.
MR. TAYLOR: Well, perhaps I could make a final comment for this hearing today, Mr. Chairman. I just would like to thank also the witnesses for coming in this morning. I think we have received a lot of good information. I would be remiss if I didn't mention that we have a very strong industry in Nova Scotia called the trucking industry and we know that that industry continues to reel because of the high prices of fuel. I trust, Mr. Hogg, that the next time you and your counterparts from across this great country sit down and talk with Mr. Martin, again you will impress and re-impress on him the profound need to reduce the price of federal fuel excise taxes because it is really hurting our economy. The federal deficit is gone and maybe, just maybe, we can convince our provincial Liberal colleagues to do likewise. Thank you very much.
MR. CHAIRMAN: On that note, I, too, on behalf of the committee would like thank you, Mr. Hogg, and Mr. Hennebury for coming before the committee and being very helpful and forthright in your answers.
Next week, we will be having the issue on hand, Nova Scotia credit rating. In fact, Mr. Hogg, you will be making a return appearance along with Doug Stratton from your department as well as the Auditor General, Mr. Roy Salmon, who is also in attendance today with his staff. So with that, we will resume at 8:00 a.m. next Wednesday. Thank you.
[The committee adjourned at 9:59 a.m.]