Carbon Taxes Start, But Businesses Remain in the Dark

Although taxpayers have been provided with tax rebates to offset the new carbon pricing system that rolled out in four Canadian provinces on April 1, small to medium-sized businesses are facing new costs, and remain in the dark about how the government intends to help them.

Little information has been made available, despite the federal government’s promise that they too will receive support designed to help offset these costs, which could have a significant impact on their bottom line. Or worse still, costs that may flow through to cash-strapped consumers.

There is some good news, however: last week the government provided clarification on the carbon exemptions available to farmers – confirming that they became available on April 1.

For farmers, it was proposed in the March 19, 2019 federal budget that a carbon exemption on farm fuel purchased at cardlocks would be available. However, the budget also proposed a 30-day comment period which lead to confusion about its implementation date.

The CRA has since clarified that the agency “will administer draft amendments on the assumption that the amendments will be enacted. As such, the expanded relief for farmers would be available as of April 1.”

Farmers must meet the eligibility requirements below and fill out a Fuel Charge Exemption Certificate form. Eligible fuel costs must be used for:

  • The operation of eligible farming machinery on a farm for the purposes of farming
  • The operation of eligible farming machinery for the purposes of going from a location at a farm to another location at a farm

For taxpayers, carbon tax relief comes in the form of Carbon Action Incentive Payments that can be claimed on the 2018 tax returns by residents of the four provinces that implemented their own carbon pricing system on April 1. This is a welcome relief for individuals in Ontario, Saskatchewan, Manitoba, and New Brunswick. But, what’s in place to help businesses in the same provinces that are already abiding by the carbon pricing system?

For businesses. There are many questions yet to be answered by the government with regards to the help promised for businesses in those provinces. The government developed a Backgrounder on the issue last fall and noted: “The Government recognizes that SMEs can expect to incur additional costs as a result of carbon pollution pricing, and is committed to providing additional support to help them take climate action, and lower their energy costs while remaining competitive. . . The Government is developing options on how best to deliver this direct support to eligible businesses. Further details on the program design will be outlined in early 2019.”

Unfortunately, these details have still yet to be provided. Will there be rebates or exemptions? What documentation will be required to determine eligibility for exemptions? When will these programs start?  

Note that Nunavut and Yukon, territories that adopted the federal carbon pricing system, will face these costs as of July 1 and it remains to be seen if these issues will be addressed by then.

It’s important that Canadians weigh in and provide comments on these issues, particularly as we await further clarification on how the government intends to help business immediately affected by the implementation of these carbon pricing programs. Finance Canada is seeking comments on additional regulatory proposals (between March 19 and April 19). These proposals include:

  • Expanded relief of the fuel charge for electricity generation for remote communities
  • A rebate for exports of fuel under certain conditions
  • Integration of the Saskatchewan output-based performance standards system with the federal fuel charge
  • Expanding relief of the fuel charge for farmers, such that a registered distributor can deliver, without the fuel charge applying, gasoline and light fuel oil (e.g., diesel) to a farmer at a cardlock facility, subject to certain conditions

Comments can be sent to:
Unfortunately, lack of clarity on carbon tax relief is another provision on the slow train businesses are experiencing with the government as tax filing deadlines for small business owners fast approach.

The CRA only just released their guide for proprietors last week. Compliance information coming so late in the season, especially considering many businesses require guidance on the newly implemented Capital Cost Allowance (CCA) guidelines, makes tax certainty and compliance more difficult.

With this in mind, providing tax and financial guidance on these timely issues is an important value that tax specialists can offer their business clients in this very busy tax filing month.

Additional educational resources: Hone the skills you need to have the high-value conversations that businesses depend on as tax and economic changes occur. Enrol by May 15 and attend the Spring CE Summits for post-budget action strategies. Or study online and take the MFA™ – Business Services Specialist program.


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