C-342: An Act to amend Excise Tax Act (carbon levy)
The current approach simplifies the vendor’s calculation of the amount of tax payable since the vendor is not required to back out other taxes, levies and charges at the point of sale in order to determine the amount of GST/HST payable. It is also easy for consumers to understand.
Given the various carbon pricing mechanisms that may exist in Canada, it would entail significant difficulty for vendors, especially those operating in multiple jurisdictions, to accurately calculate and back out all taxes or fees associated with carbon from the GST/HST base. The impact of removing GST/HST on carbon taxes or fees would be negligible for most fuels. Such relief would likely not be noticeable for consumers given that the GST/HST on a carbon tax or levy comprises a very small portion of the total fuel price.
As drafted, the Bill would result in forgone federal revenues of about $70 million in 2017. Removing all carbon pricing from the GST/HST base, the apparent intended purpose of the Bill, would cost about $260 million in 2018, increasing to about $810 million in 2022. Removing carbon taxes or fees from the GST/HST base would represent a significant policy precedent which could create or exacerbate pressures on the Government to remove other similar charges from the GST/HST base.