+ RMA Rural Municipalities
of Alberta

Resolution 7-02S

Tax Exempt Fuel User Program

January 1, 2002
Expiry Date:
March 31, 2005
Active Status:
Vote Results:

WHEREAS the Alberta Government is considering the elimination of the existing Tax Exempt Fuel User (TEFU) Program; andWHEREAS elimination of this program would effectively impose a substantial tax increase on Alberta municipal governments; andWHEREAS unlike Alberta businesses, municipal governments in Alberta have not received any meaningful financial savings flowing from the implementation of the recommendations of the Alberta Business Tax Review Committee, but will instead experience a net tax increase if the TEFU program is eliminated; andWHEREAS provincial program adjustments and funding cuts over the past decade have made it increasingly difficult for municipalities to engage in rational long-term planning and effective budgeting on behalf of local ratepayers; andWHEREAS the elimination of the TEFU program would only add to a long list of negative and cumulative impacts that municipalities have absorbed as a result of provincial downloading and budget-cutting; andWHEREAS past experience suggests that cuts to programs that benefit municipalities are rarely if ever reversed when the Government of Albertas financial health improves;

Operative Clause:

THEREFORE BE IT RESOLVED that the Alberta Association of Municipal Districts and Counties urge the Government of Alberta to maintain the current Tax Exempt Fuel User Program, and ensure that Alberta municipalities continue to receive at least the current level of financial savings available under the program.

Member Background:

The Tax Exempt Fuel User (TEFU) program provides tax exemptions and rebates on fuel used off-road for commercial purposes, or by municipalities and education institutions (again, off-road use only). Tax exemption numbers are issued for vehicles which are not required to be licensed or registered for on-road use (e.g. heavy machinery for road construction or logging), thus allowing these vehicles to use tax-exempt marked fuel. Alternatively, commercial operators, municipalities, etc. may apply for rebates of tax paid on clear fuel, for that portion of fuel used off-road by licensed vehicles. The program currently provides benefits of some $120-$130 million per year: $75-$85 million accrues to users of Fuel Tax Exemption numbers, who are able to purchase tax-exempt marked fuel; and $45 million is paid out in the form of rebates.In 2000, the Alberta Governments Business Tax Review Committee recommended that the TEFU program be amended, to eliminate the rebate portion of the program. Apparently, the Government is now considering the impacts of canceling the entire program.Elimination of the TEFU program would effectively impose a substantial tax increase on Alberta municipalities. Rough estimates suggest that an average rural municipality receives approximately $20,000 per year in TEFU rebates, and approximately $90,200 per year in savings through the tax exemption portion of the program (average consumption of about 820,000 litres of marked diesel fuel each year, with marked diesel currently available at about 11 cents per litre less than clear diesel). The net impact of eliminating the TEFU program would therefore exceed $110,000 per year in additional fuel tax burden for an average rural municipality.

Provincial Ministries:
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