GST on carbon taxes in Alberta, B.C. worth millions in federal revenue

Feds to raise millions in GST on carbon taxes

OTTAWA — The federal government stands to raise as much as $280 million in revenue off provincial carbon taxes in Alberta and B.C. in the next two years despite claims carbon taxes would be revenue neutral for Ottawa.

Both Prime Minister Justin Trudeau and Environment Minister Catherine McKenna have long insisted Ottawa would collect no revenue from the carbon price the federal government is requiring the provinces and territories impose by 2018.

However, a new report from the Library of Parliament shows federal coffers stand to benefit financially when the five per cent GST is applied on top of carbon taxes built into the prices of goods and services such as gasoline or utilities.

In April 2016, the Canada Revenue Agency said provincial carbon taxes would be subject to GST. Warawa asked the library to find out how much Ottawa stood to gain as he prepared a private members’ bill to reverse the CRA’s decision.

Last week, the answer came back: as much as $130 million this year and $150 million next year in Alberta and B.C., the two provinces where carbon taxes are already in place.

Those numbers represent five per cent each of the annual cost of the carbon taxes in those provinces: $1.3 billion in B.C. per year, and in Alberta, $1.3 billion in 2017-18 and $1.7 billion in 2018-19, an average of $1.5 billion.

“That’s where the federal government suddenly gets rich off Canadians,” said B.C. Conservative MP Mark Warawa, who requested the report.

A spokesman for Finance Minister Bill Morneau called the Library of Parliament and subsequent Conservative criticism “fun with numbers.”

“As we all know, the GST/HST is a broad-based tax on consumption in Canada, and it’s calculated on the final amount charged for a good or service,” said Daniel Lauzon. “That’s always been the case.”

Lauzon said revenues raised directly by the carbon tax would remain in the province where they are raised.

In Alberta and B.C., GST is applied on top of the carbon tax on direct consumer fossil-fuel purchases, such as gasoline, as well as on products where a business has added some or all of the cost of the carbon tax to the cost of their good or service.

How much GST is raised by taxing the carbon tax really depends on what businesses choose to pass on to consumers, the report notes.

A natural gas bill for a customer from FortisBC, for example, shows that on a gas bill of $59.14, the carbon tax was $10.28. The five per cent GST, which comes to $3.47, is charged on the total, including the carbon tax.

The GST revenues from carbon taxes could rise significantly once every province has implemented the carbon tax or cap and trade plan by next year. A minimum price of $10 per tonne of carbon is required in 2018, rising to $50 per tonne by 2022.

“The federal government will be reaping in billions of dollars by putting in a price on carbon,” Warawa said. 

“So when the prime minister and the minister have said publicly and in the House that it will be revenue neutral for the federal government, that is not true.”

Ontario and Quebec both have a cap-and-trade system, which would also see some GST revenues raised when applied on higher costs of gasoline and other goods and services as a result of the cap and trade costs.

No other provinces or territories have yet unveiled their plans for meeting Trudeau’s requirement. All but Manitoba signed an agreement in December committing them to introducing a carbon price.

— Follow @mrabson on Twitter

Mia Rabson, The Canadian Press

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