Doubled gas tax drives N.L.'s inflation rate high above Canadian average

Newly introduced taxes in Newfoundland and Labrador are hitting consumers' pocketbooks, Statistics Canada has found, and helping push the province's inflation rate to the top of the country.

Additional taxes on insurance premiums and gasoline, along with the increase in the provincial HST, can help explain why the province's inflation rate is soaring — coming in well above the Canadian average.

Kyle de March, an analyst at Statistics Canada, says those factors are at the top of the list when looking at the change in the province's consumer prices.

"They weren't just increasing provincial components of the HST, there were other taxes that were added on as well," de March said Monday night. "So for example, gasoline is playing a very big role in Newfoundland and Labrador." 

Taxes playing big role

The Consumer Price Index in Newfoundland and Labrador rose 4.1 per cent in December, data released by the statistical agency Friday showed.

That compares to a 1.5 per cent increase across the country. In New Brunswick, which saw the second-highest inflation rate, the CPI rose just 2.3 per cent.

The index, an approximation for the cost of living, means the after-tax prices of a selected basket of goods in Newfoundland and Labrador is 4.1 per cent higher in Dec. 2016 than it was in Dec. 2015.

Gasoline and home insurance prices were among the biggest risers in Newfoundland and Labrador, and the new taxes are playing their part.

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In its 2016 budget, the provincial government introduced a slew of tax increases in response to a massive provincial deficit.

The HST rose from 13 per cent to 15 per cent, a provincial 15 per cent tax is now applied to insurance premiums, and taxes totaling about 18.65 cents were added to every litre of gasoline. The base gas tax effectively doubled in last April's budget. 

"Obviously, part of it is taxes," de March said.

The price of gasoline, however, rose about 29.3 per cent compared to the previous year, de March said — bigger than just the tax increase. So you can't blame everything on the budgetary measures, he says.

"You see in other parts of the country, where there haven't been amendments to tax rates, we're still seeing inflation," he added.

"It definitely plays a role, but … you can't say that taxes made an impact across the board, on every consumer good that was purchased." 

Not every price increased — according to Statistics Canada, prices of fresh and frozen beef, cheese, vegetables and kitchen utensils fell year over year.

Tough choices, temporary measures: Ball

Speaking to reporters on Tuesday, Premier Dwight Ball said he knew that some of the budget measures his government implemented would have an impact on consumers.

However, he said, given the financial state of the provincial government, there was little choice.

"Many of those … are temporary measures and short-time measures that we had no choice, really, but to get the situation under control and we did that last year," he said.

He says Newfoundland and Labrador is still an economically competitive province, on the whole, for residents and businesses.

He pointed to the low cost of education, and the fact the province's HST is on par with the rest of Atlantic Canada.