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Greater Victoria, BC News


Date ArticleType
6/7/2010 Media Release
Federal legislation for the current gas tax fund program

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Federal legislation for the current gas tax fund program

Economic Issue Statement

In the absence of a legislative framework, infrastructure investment in Canada has waned since the 1940s,

resulting in lower levels of productivity and reduced economic performance. Often taking a back seat to

entitlement and program spending, the country’s infrastructure is now a major concern for multinational

corporations and a detraction to foreign direct investment. Legislation reinforcing the commitment to

infrastructure investment is urgently needed to provide for a predictable and positive business climate, an environment where Canadian businesses can confidently make long-term investment decisions that

will propel our country into a new era of prosperity.


Following the Second World War, Canada was among the strongest nations in the world[1] in terms of

public infrastructure investment, enabling an environment where Canadian and multinational

corporations leveraged additional capital investments and significantly improved the economic

growth and productivity of the Canadian economy for the decades to come. By the late 1960s and into

the 1970s, public infrastructure investment had started to slow, as different orders of government

deferred maintenance on the country’s infrastructure system and focused on program spending at the

cost of new capital investment[2].

During the 1980s and 1990s, provincial and federal budget deficits continued to exact a toll on

infrastructure investment as governments of the day sought to balance budget deficits, which had

grown to record proportions when measured against the GDP of the country. During this time the

municipal infrastructure gap as a percentage of national GDP grew from 2.7% in 1984 to 5.0% in early

2000s[3]. Starting in 2005, the federal government recognized this challenge, announcing the New Deal for

Canadian Cities and pledging to commit funds raised through the national gas tax to infrastructure

investment. This pledge was reaffirmed in 2008, when the federal government committed to extending

the program and provided $2 billion annually for investment that supports sustainable municipal

infrastructure. This was an important and welcome decision. Unfortunately, the municipal infrastructure

gap is growing by approximately $2 billion per year. This funding stabilizes the gap, but does not

address the accumulated infrastructure deficit, which stands at roughly $123 billion, and the additional

$115 billion in projected demand[4].

­­­­­­­­­­­­­­­­­­­­ The issue has come to a critical point as much of the country’s infrastructure, the backbone of our

economy, has eclipsed over 80% of its life expectancy[5]. In short, corporate Canada can no longer afford

any deferral of the issue or any policy reversals if we are to remain competitive in the global market

place. More than 80% of foreign multinational executives surveyed indicated that the poor state of

business infrastructure has adversely affected Canada as a destination for foreign direct investment. One

of the key concerns raised is the state of the country’s physical infrastructure[6] when compared to other G7


While the federal government’s pledge of $2 billion is a step in the right direction, more needs to be done.

Progress made in restoring infrastructure investment through the Gas Tax Program is encouraging but

efforts must be made to protect the value of the allocated $2 billion from the effects of inflation. As

competition for infrastructure continues to increase in jurisdictions such as China and India, so do the

prices of construction materials in Canada. In the United States, the Construction Cost Index[7], a gauge of

infrastructure expense, grew by 3.5% in 2010 and is projected to grow by an annual rate of 3.3% in 2011,

or two and a half times the rate of consumer inflation. Without a provision to index infrastructure

investments through legislation, the current rate of investment will fall by half in real terms within 15

years, effectively returning to levels equal to those prior to 2005.

In addition, legislation is imperative to ensure that year over year program/entitlement expenditures

no longer compete with, and displace, critical infrastructure investment, which is required to help set the

stage for a new era of prosperity and productivity. Legislation will provide a more predictable

investment climate, the absence of which would encourage further deferral of these investments, ultimately

adding cost and increasing the burden on taxpayers[8], in particular, the business community. This

legislative framework can further act as a tool to help ensure that the tenets of good tax policy are

followed, namely; efficiency, equity, accountability, and ease of administration. Current provincial

agreements vary greatly in their implementation and the framework for accountability in each

jurisdiction also varies.


That the federal government:

1. Establish federal legislation to secure the current federal gas tax program;

2. Index the annual investment in the program to the appropriate infrastructure cost index; and,

3. Require consistency in the legislative framework that strengthens the program’s efficiency, equity,

accountability, and ease of administration

Submitted by the Greater Victoria Chamber of Commerce.

The Economic Policy and Transportation Committees of the Canadian Chamber of Commerce support this resolution.


[1]  OECD Economic Studies No. 22, Medium-term Determinants of OECD Productivity (Spring 1994)

[2] TD Bank Financial Group, "Mind the Gap: Finding the Money to Upgrade Canada's Aging Public Infrastructure" (May 2004)

[3] TD Bank Financial Group, "Mind the Gap: Finding the Money to Upgrade Canada's Aging Public Infrastructure" (May 2004)

[4] Federation of Canadian Municipalities, "Danger Ahead: The Coming Collapse of Canada's Municipal Infrastructure" (November


[5] The Canadian Society of Civil Engineering, "Civil Infrastructure Systems Technology Roadmap 2003-2013" (June 2003)

[6] The Conference Board of Canada, "Open For Business? Canada's Foreign Direct Investment Challenge" (June 2004)

[7] American City & County’s Municipal Cost Index

[8] Dr. M. Saeed Mirza, "The Urgency of Addressing Canada's Infrastructure" (November 22, 2004)


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