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May 2008 Archives

May 31, 2008

Who needs a seat on the Security Council?

Ottawa’s foreign-policy community has been in a tizzy ever since the Prime Minister said the federal government has not decided whether Canada will make a bid for a seat on the United Nations Security Council. The previous Liberal government had announced the country would seek a spot on the UN’s top governing body in 2010, and foreign affairs professionals want that decision to stick.

The choice about whether or not Canada should try to secure a seat shouldn’t be a difficult one for the Conservatives. The protracted globetrotting campaign such a diplomatic effort would necessitate would be costly, and taxpayers would rightly grumble about the bill. Moreover, the logrolling needed to win enough votes in the UN General Assembly could result in votes that contradict principles enshrined in Canada’s foreign and domestic policy.

And even if Canada were to win a coveted two-year term on the council — something the country has previously done about every 10 years — it will expand the international influence of an office that actively opposes the Prime Minister, specifically the department of foreign affairs.

A cocktails-and-canapés campaign for a Security Council seat would cost millions of tax dollars. When Canada last competed for a UN seat, foreign affairs spent $2-million.

The Ottawa Citizen reported in 1998 that Ottawa sent academics and retired diplomats to nearly 100 countries to lobby foreign ministries and heads of government. And, according to the Toronto Star, it became a dirty affair. The competing Greeks sent undecided UN ambassadors and spouses on an all-expenses paid cruise in the Aegean Sea while the Dutch pulled together a concert of Amsterdam’s Royal Concertgebouw Orchestra and an evening cruise on New York’s East River for UN pooh-bahs. Ottawa, for its part, handed out tickets for the Cirque du Soleil at Manhattan’s Battery Park.

Such inducements are par for the UN course, and diplomats don’t apologize for these tactics. Robert Fowler, who was Canada’s longest-serving UN ambassador, takes credit for overseeing our last Security Council campaign. He explains the junket-for-your-vote strategy as routine. “You have to use different ways to get people’s attention,” he said in 1998. “There’s a certain amount of razzle-dazzle and balloons and music, the same as any political campaign.”

Really? If a political party or lobbyist engaged in this type of vote-winning tactics in Canada the RCMP would soon come knocking.

If the price tag alone isn’t enough to halt Canada’s campaign, the Conservative caucus should ask what promises academics and ex-diplomats might make to other governments to win their support. Mr. Fowler and Paul Heinbecker, another former UN ambassador, have argued that Ottawa’s foreign policy must change if we are to win over enough members of the General Assembly. They point to the Conservatives’ decision to target more foreign aid dollars to fewer countries — rather than sending fewer dollars to more countries — as a reason for those governments no longer receiving our tax dollars to reject Canada’s bid. They also warn that our reasonable decision to protect jobs and the economy by ignoring Canada’s Kyoto Protocol greenhouse-gas reduction targets might mean European nations voting against us, despite their own lackluster commitment to reduce carbon emissions. And lastly, we are told, to win the support of Muslim nations, our country’s commitment to our democratic allies must be compromised at the UN — specifically, by abandoning Israel.

The reward, of course, of such policy reversals and wasting buckets of tax dollars will be a seat at the UN’s “high table.” And for what? Representation on a council governed by the five permanent members and often stymied by China and Russia. Taxpayers say thanks, but no thanks.

Even if Mr. Harper decides to go for it and wins a seat, it will be a pyrrhic victory. This is because of all the bureaucracies in Ottawa none is as insubordinate to elected officials as the foreign affairs department. Officials in this department are, of course, happy to follow government direction when their wishes converge with those of the Conservatives. Yet, when there is a policy shift they disapprove of, or a disagreement with their political masters, the system quietly grinds to a halt.

The UN seat will hand officials at foreign affairs a bigger stick to beat the government by undermining its agenda or even contradicting its ministers. Mr. Fowler believes the reason why the Conservatives will not contest the seat is because “the government has no confidence in its own foreign policy.” Actually, the Conservatives have lost confidence in its foreign affairs bureaucrats. Prime Minister Harper should announce Ottawa will not seek a Security Council seat.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

May 14, 2008

Canada’s 10th Annual Gas Tax Honesty Day

· Taxpayers Federation repeats call for lower and dedicated gas taxes – eliminate the “deficit elimination” tax and stop taxing the tax.

· Motorists beware – B.C. pump prices will increase by 2.41¢ on July 1 and 7.23¢ in 2012 as a result of province’s new carbon tax.

· Gas prices will rise nationally if Canada adopts carbon tax.

HALIFAX / FREDERICTON: The Canadian Taxpayers Federation (CTF) today launched its 10th annual Gas Tax Honesty Campaign, marking Gas Tax Honesty Day. The yearly campaign kicks off the summer travel season for Canadian motorists. It is also the day of the year that taxpaying motorists are reminded of the high tax component hidden in the price of gasoline – a tax burden that will only increase if the federal government and provinces adopt a carbon tax on fossil fuels.

Over the past 12 months – the period of May 2007 to April 2008 – the average national price of a litre of gasoline paid by Canadian motorists was approximately $1.16. This represents a 17-cent increase over last year’s average price. Today, gasoline taxes account for an average 28% of the pump price.

CTF directors held press conferences at nine gas stations across the country to talk about government tax gouging. Afterwards, a handful of customers were refunded the tax component of their pump purchase to highlight the heavy tax load on gasoline. If proponents of a carbon tax are successful Canadians will pay more for gas and diesel (as well as natural gas, propane and home heating fuel).

“Ottawa will collect approximately $5-billion in direct gasoline and diesel taxes this year. Another $1-billion will come from the GST,” said federal director John Williamson. “The good news is Ottawa will spend $1.95-billion or 37% of its gas and diesel tax revenue on roads and highway infrastructure this year. The amount will increase to 52% next year when roadway spending is scheduled to hit $2.7-billion. This level of spending exceeds the 50% target first advocated by the CTF in 2002. Four years ago the federal government spent only 7% of gas tax revenues on roads making this an impressive turnabout. This is a partial victory for motorists. To complete it, gas taxes need to be lower.”

Williamson continued, “The bad news is some are calling for new taxes on most sources of energy, including gasoline. Consumers should be under no illusion, enacting a carbon tax will mean higher energy prices and a tax increase on the middle class. As a result of B.C.’s carbon tax, gas prices in the province will increase by 2.41¢ on Canada Day and by 7.23¢ in 2012. It will impact family budgets.”

The CTF is calling on Ottawa to cut, rather than raise gas taxes by eliminating the 1.5 cent/litre “deficit elimination tax” as a first step (see details, next page); stop taxing taxes by removing the GST (and HST where applicable) charged on federal and provincial gas levies; and reducing the federal levy an additional 2.5 cents. These three measures would reduce the gas tax bite by 5 cents a litre and are, in part, consistent with what Stephen Harper promised in Opposition.

To date, the CTF has delivered more than 150,000 petitions to Parliament Hill demanding lower and dedicated gas taxes. The CTF began its Gas Tax Honesty Campaign in 1999 to inform Canadians of the gasoline taxes they pay at the pumps, to ensure gasoline taxes are dedicated toward roads, and to pressure Ottawa to cut gasoline taxes not spent on road construction. The 2008 report is available at:

Additional Canadian Gas Tax Facts:

The federal government collects billions of dollars each year from gas and diesel excise taxes. In the 2007-08 fiscal year, Ottawa collected $5-billion in gasoline and diesel taxes (not counting GST revenues). In fiscal 2004, Ottawa reinvested only 7 per cent of its gas tax revenues in roads and highway development. In 2007-08, the federal government dedicated $1.8-billion to roads and highways. This represents 36 per cent of annual gas tax revenues. The same amount – 37 per cent – will be spent this year. By 2009-10, over $2.6-billion is scheduled to be spent on road infrastructure, which exceeds the 50 per cent of gas tax revenue target first advocated by the Canadian Taxpayers Federation in 2002. This turnabout is a partial victory for taxpaying motorists. To complete it, gas taxes need to be lower.

GST is charged on the full pump price, gasoline taxes included. It is a tax-on-tax. In 2008-09, the federal government will collect $1.1-billion in gasoline GST revenues. Last year, Ottawa collected $1.25-billion from GST on gasoline. (The tax bite was eased to some extent as a result of the second point GST reduction.)

The federal government benefits from higher gas prices. As the pump price increases so too does the GST. For every 10 cent increase in the price of gasoline, Ottawa’s GST revenues rise by $100-million.

As a deficit reduction measure in 1995, Ottawa increased the federal gasoline tax from 8.5 to 10 cents per litre. The deficit was vanquished a decade ago, but the tax remains and the federal government’s gouging at the pumps continues even with multi-year, multi-billion dollar federal surpluses. Since the budget was balanced in fiscal 1997-98, Ottawa has collected $6-billion from its so-called “deficit elimination tax.” All said, the federal gasoline tax increased by 567 per cent between 1985 and 1995 – rising from 1.5 to 10 cents per litre.

In opposition, the Conservatives made repeated promises to remove the GST tax-on-tax bite and pledged to remove the GST completely when gasoline prices exceeded 85 cents per litre. In the summer of 2005, Mr. Harper was quoted saying that gas taxes could be reduced by as much as 5 cents a litre.

Three Conservative budgets have failed to lower gas taxes although roadway spending is substantially increased.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

May 7, 2008

Goodale’s Gaffe

· Returning surplus to taxpayers is good policy

Following the Bank of Canada’s downward revision of the country’s growth rate in 2008 there is alarm in some quarters the federal budget will soon tip from surplus to deficit. This anxiety is welcome because it signals a public consensus in Canada that did not exist 15 years ago when the norm was deficit financing. Today, voters take a dim view of any politician willing to run deficits, no matter how small. We are a nation of deficit hawks.

The assumption in Ottawa is that a slowing economy might force a deficit because there will be fewer dollars available as a result of recent – and modest – tax relief. This has it backwards since years of spending growth is the culprit.

In October, 2007, Finance Minister Jim Flaherty delivered a $60-billion package of broad-based tax cuts. It put in place a schedule to chop the business tax rate from 22.12% to 15% by 2012; cut the GST an additional point to 5%; and reversed the personal income tax rate increase the Conservative government enacted in its first budget. The surplus was so large Mr. Flaherty didn’t even need to cut back federal expenditures. Program spending increased by $13-billion last year and will go up another $7-billion in 2008.

For the Liberals this is apparently awful public policy. Opposition leader Stéphane Dion recently thundered, “In two years, they destroyed the fiscal framework. They swept the cupboard bare and put us on the edge of a deficit.” Former Liberal finance minister Ralph Goodale similarly went into rhetorical overdrive last week in a column he wrote entitled “How Stephen Harper ruined our national balance sheet.” He lists a number of big ticket items the government should fund but cannot because of “costly” tax relief.

The surplus is the result of overtaxing Canadians and should not be confused with good fiscal management. After the budget was finally balanced in fiscal 1997 the idea of setting annual spending targets in a budget and operating within those limits was abandoned. According to the C.D. Howe Institute a decade of fat surpluses resulted in lawmakers spending more than budgeted “for a cumulative spending overrun of an eye-popping $28.7-billion, a sum almost equivalent to what Ottawa spends on elderly benefits a year.” It didn’t matter how much money was spent provided the budget wasn’t in the red.

Massive surpluses made possible gigantic levels of government spending irrespective of the party in power. If we compare expenditure growth of the two-year Liberal minority to the first two years under Conservative rule, we discover they are virtually undistinguishable. Each party increased the size of government by roughly 14%. Their shared addiction translates to a $47-billion spending increase in four short years.

No doubt returning part of the surplus to taxpayers will make Minister Flaherty’s job more difficult, but given the economic uncertainty facing Canadians it is good the government reduced the tax burden. It places the economic well-being of businesses and families ahead of Ottawa’s limitless spending appetite.

Yet, it will not be difficult for Mr. Flaherty to trim spending to avoid a deficit (or for that matter offer personal income tax relief in the 2009 budget). Under the Conservatives the federal government has already expanded by $26-billion. And what has been the impact of this spending on Canadian taxpayers? Not much according to Mr. Goodale. He says, “Stephen Harper is today the biggest spending prime minister is history, but few Canadians can name a single thing they’ve gained from it all.”

The Conservatives should remember this the next time they cut a program and are immediately denounced by Ottawa’s many special-interest lobbyists. Spending is up and according to former finance minister Goodale it hasn’t made a difference to the lives of ordinary Canadians. It’s unfortunate Mr. Goodale failed to understand that excessive government spending can be wasteful when he was still writing budgets. Finance Minister Flaherty should heed his predecessor’s insight. It is unusual to hear such honesty on Parliament Hill.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

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