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Canada to Increase Federal Carbon Tax Amid Coronavirus Pandemic

Posted on Apr. 1, 2020

Canadian Prime Minister Justin Trudeau has rejected calls to postpone an increase in the federal carbon tax, a move that has elicited pushback from several taxpayer associations.

Asked if the government was considering postponing the increase to ease the economic hardships wrought by the coronavirus pandemic, Trudeau said the rate would go up as planned. The tax increases from C $20 to C $30 per metric ton of CO2 emissions April 1, and then by C $10 per year until it reaches C $50 in 2022.

“We know that we need to do things to make sure that we're both supporting families through ordinary times and through difficult times, and moving forward on continuing the fight against climate change — which remains even at a time of an immediate crisis and pandemic,” Trudeau said. Speaking at a news conference outside his home March 30, Trudeau explained that the carbon tax, established under the Greenhouse Gas Pollution Pricing Act, helps address climate change while putting money into citizens' pockets in the form of rebates for those who pay the tax.

However, Todd Lewis, president of the Agricultural Producers Association of Saskatchewan, reiterated farmers' complaint that rebates are not enough to offset the pandemic's effect on the agricultural industry. The government seems to imply "that the tax money gets paid back to the general population, but . . . the whole concept that the money is rebated to the people [who] pay it — that isn't true in agriculture. And that's why we're disappointed with this decision,” Lewis told Tax Notes March 31.

In a March 31 release, the Western Canadian Wheat Growers Association called on the federal government to eliminate the tax and acknowledge the steps Canadian grain farmers have already taken to address climate change.

The release breaks down the potential financial impact of the increased carbon tax, citing as an example a family of four that spends [C] $12,000 annually on groceries and restaurant meals. "Projections indicate that the increase in the carbon tax will result in a 1 percent increase in the actual cost," the release says. "For groceries alone, this amounts to [C] $120 per year. The average annual home heating cost is [C] $1,500, which will be increased by another [C] $300 in carbon tax costs.”

“This is especially alarming when one considers that ‘nearly half (48 percent) of Canadians are [C] $200 or less away from financial insolvency,'" the release says, citing an October 2019 report from the Ipsos research group.

Farmers were not the only taxpayers unhappy with the announcement. The Canadian Taxpayers Federation on March 30 urged the government to push back the tax increase during the coronavirus pandemic, and the group's federal director, Aaron Wudrick, told Tax Notes that the group will continue pushing for a carbon tax freeze. 

“It is very confusing . . . why this government has opted to press on with this one particular tax increase while they use every other channel available to try to get money into people's pockets as a stopgap measure to help individuals and businesses survive during this economic shutdown," Wudrick said March 31. "Freezing the federal carbon tax would be entirely consistent with the rest of their approach.”

About two weeks before Trudeau's announcement, Canada’s Supreme Court announced it had postponed  two hearings to determine the constitutionality of the carbon tax. The hearings in Attorney General of Saskatchewan v. Attorney General of Canada and Attorney General of Ontario v. Attorney General of Canadawhich were scheduled for March 24 and 25, respectively, have been pushed back until June. The province of Alberta plans to join Saskatchewan and Ontario in the constitutional challenge, according to a spokesperson at the Alberta premier's office.

“The government of Alberta is applying for leave to the Supreme Court of Canada to ensure [that] our successful argument that Ottawa’s carbon tax is a federal overreach will be heard together with Saskatchewan and Ontario’s appeals," the spokesperson said. "The government of Alberta wants to ensure that the decisive decision of the Alberta Court of Appeal is given equal weight when deciding this important constitutional issue.” On February 24 the Court of Appeal became the first provincial court to hold that the carbon tax is unconstitutional.

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