Diesel fuel has now overtaken labour as the number one operating cost for many – if not most – truck fleets. Fuel is also one of the most taxed commodities. My next two columns will focus on federal fuel tax issues. In this month’s column, I take on Prime Minister Stephen Harper’s contention that there is so little governments can do to affect the price of gasoline (and by translation diesel fuel) that it’s not worth doing anything.

In next month’s column, I will comment on Liberal and Opposition leader, Stephane Dion’s carbon tax proposal.

But, first to the Prime Minister who last month all but ruled out any relief from federal taxation on fuel. In part, you can see where he is coming from. With pump prices for commercial diesel fuel at record highs, an elimination of the four-cent-per-litre federal excise tax on diesel fuel would, all other things being equal, provide price relief of only about 3%.

However, that is not the point. For some, a few pennies here and there would make a difference. But, more than that, the taxation of fuel, especially commercial fuel through excise taxes is an outdated and regressive way to tax this essential product.

(Also, don’t forget that the GST is added on top of the price, including the excise tax).

Regardless, the continued existence of excise taxes on commercial diesel fuel flies in the face of the federal government’s own mantra – as expressed to provincial governments like Ontario – that business input taxes should be reduced or eliminated and that there should be a nationally harmonized sales tax system based on the GST. We couldn’t agree more; but is the federal government walking the talk?

The federal excise tax on commercial diesel fuel was introduced in the mid-1980s by the Mulroney government for the sole purpose of reducing the federal fiscal imbalance – in other words to generate revenue. Shortly thereafter the Conservative government of the day introduced the GST; replacing the manufacturers’ sales tax.

At the time, the trucking industry argued that if the federal sales tax system was moving to a valueadded basis doesn’t it also make sense to fold the excise tax on diesel into the GST? The Standing Committee on Finance said of course we were right from a tax policy perspective, but the federal government needed the money to eliminate the staggering deficits it was incurring, so we would have to wait. We’re still waiting.

Ironically, in the 2006 federal budget – the current government’s first budget – the excise tax on jewellery, clocks and articles made of semi-precious stones was eliminated. However, commercial diesel fuel (and gasoline) is still taxed as a luxury.

And, while trucking companies do get GST credits for diesel fuel purchases, the skyrocketing fuel prices are having a major impact on cash flows. Truckers pay for fuel, including taxes, at the pump or if they are buying in bulk most pay weekly or within 15 days. However, the trucking company’s customers (even if they pay a full fuel surcharge) don’t pay for at least 30 days and more often 60 to 90 days.

Only four years ago, Harper proposed that the GST on gasoline be eliminated when prices got above 85 cents per litre and forecasted that the measure would have saved consumers about a penny a litre. Not much, but he said the main thing is that Canadians know the government is not trying to gouge them at the same time they are having trouble filling their tank. That is a principle well worth remembering today.

Truckers feel they are being gouged by the combination of federal and provincial tax they pay on their most costly business input.

– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.