Sales Tax on Carbon Pricing to Net Government $486 Million in 2024: Parliamentary Report

Prime Minister Justin Trudeau looks on as Deputy Prime Minister and Finance Minister Chrystia Freeland speaks in Ottawa on Oct. 7, 2022. Adrian Wyld / The Canadian Press

The federal government will rake in nearly a half billion in sales taxes on the carbon tax this year, according to a Budget Office report.

The figure calls into question Finance Minister Chrystia Freeland’s assertions that the carbon tax is “revenue neutral.”

A report from the Parliamentary Budget Officer showed that doing away with the five percent federal Goods and Services Tax on carbon charges “would reduce federal GST revenues by $486 million” in the fiscal 2023–24 year, increasing to more than $1 billion in 2030–31.

GST charges on carbon taxes will cost $182 million in Ontario this year and $96 million in Alberta, says the note, which was first reported on by Blacklock’s Reporter. In Quebec, the charges will come to $77 million, followed by $58 million in British Columbia, $29 million in Saskatchewan, and $18 million in Manitoba.

In Atlantic Canada, the costs break down to $10 million for Nova Scotia, $7 million for New Brunswick, $6 million for Newfoundland and Labrador, and $1 million for Prince Edward Island.

Ottawa has said repeatedly that it doesn’t make any money off of the carbon tax. In a government handout, it said the “pollution pricing system is designed as revenue neutral,” adding that “all proceeds collected [are] returned to their jurisdiction of origin, mostly in the form of rebate payments that help low- and middle-income families the most with their daily cost of living.”

Ms. Freeland has made similar statements on multiple occasions. She told the House of Commons back in 2022 that the “price on pollution is revenue neutral.” That same year, she told the Commons finance committee that all of  “the money is returned directly to Canadian families.”

Now-Attorney General Arif Virani told MPs in 2019 that it was “an entirely revenue neutral plan. It is not a tax.”

The latest Budget Office report was prompted by the introduction last October of Bill C-358, a bill sponsored by Conservative MP Alex Ruff to advocate for the elimination of GST charges on carbon pricing.

Carbon Tax Costing Canadians

While the federal government has maintained that most households will receive more money back in Climate Action Incentive Payment (CAIP) rebates than they’re forced to shell out due to the carbon tax, a 2023 Parliamentary Budget Officer report suggested otherwise.

Released last March, the report indicated Ottawa’s carbon tax would result in a “net loss” of between $377 and $911 in 2024–25 for most Canadian households even after they receive federal rebates.

“Based on our analysis, most households will pay more in fuel charges and GST—as well as receiving slightly lower incomes—than they will receive in Climate Action Incentive payments,” said PBO Yves Giroux in a March 30 statement announcing the release of the report.

A second carbon tax for fuel producers, put in place in 2023, could raise gas prices further if producers are unable to meet the requirements of the regulations, according to another PBO report. The tax is expected to increase gas prices by up to 17 cents per litre, translating into an additional cost of between $384 and $1,157 annually by 2030 for the average household.

Carbon pricing, which slaps a tax on carbon-emitting fuels, was introduced in 2019 in a bid by the Liberals to reduce CO2 emissions. Prime Minister Justin Trudeau has described the carbon tax as a necessity to convince Canadians to switch to more eco-friendly fuels so the country can achieve net-zero carbon emissions by 2050.

Carbon pricing kicked off at $20 per tonne and was set to increase by $10 per tonne each year until reaching $50 per tonne in 2022. The price was then set to rise by $15 per tonne every year, starting in 2023, until it reaches $170 per tonne in 2030.