The federal government has forgiven a $119-million tax bill British Columbia Ferry Services Inc. paid to import four ferries from Germany.

B.C. Ferries will use the money to reduce ferry fares by two percent, company president and CEO David Hahn said.

Federal treasury board president Stockwell Day made the announcement this morning, saying the government is doing what it can to keep the ship building industry competitive, but that the move would be good for consumers.

The move applies to all vessels over 129 metres and will cost the federal government $250 million over 10 years.

“We consulted with industry before hand,” said Day. It's a niche market that is small in Canada, he said. “We didn't get widespread opposition to this.”

The secretary-treasurer for the Shipyard General Workers' Federation Peter Borzillo said ships longer than 129 metres have been built in B.C. and still could. “If they don't award us any contracts, how can we prove them wrong?”

“It can be done. It's been done. To make these kinds of statements [Day] obviously doesn't know anything about the industry,” he said.

“I think the duty remission is good news for ferry dependent communities,” said New Democratic Party ferry critic Gary Coons. It doesn't make up for the increases over the past seven years, he said. “The two percent is a far cry from the fare increases we just had last April.”

Coons also said he believes we should be building vessels in British Columbia.

Andrew MacLeod is The Tyee’s Legislative Bureau Chief in Victoria. Reach him here.