Achi news desk-
The federal government plans to “urgently return” money collected through the carbon price fuel charge to small businesses, making good on a commitment from 2019 to return that money.
Billed as the Canada Carbon Refund for Small Businesses, the plan includes more than $2.5 billion collected through the federal fuel charge in provinces where the Ottawa carbon price applies over the five years last
This includes Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
While the scheme is described in its name as a “refund,” the wording of the federal budget describes it as a “refundable tax credit” that will be returned directly to eligible businesses through direct Agency payments Revenue Canada, “separate from CRA tax refunds.”
An estimated 600,000 businesses with 499 or fewer employees will be eligible.
Given the cost of living focus in Budget 2024, TD Bank senior economist Francis Fong says he has doubts that this extra money flowing back into small businesses will lead to significantly lower prices.
“I think it’s going to be hard to separate the impact of higher carbon taxes as they go up year after year after year with this kind of broader cost of living affordability crisis that we’re facing right now,” Fong told Global News.
“So will this go a long way to help address affordability challenges? I suspect the answer is no, but it will go some way to mitigating that.”
As outlined in the budget document, to receive the refund businesses will have to file their 2023-24 taxes by July 15, 2024.
The Canadian Federation of Independent Businesses has long called for the money collected in the fuel charge to be returned to small businesses.
However, the CFIB has previously called on the government to reverse the rate of the fuel charge set aside for businesses from nine percent to five percent. This follows a commitment to double the rural rebate supplement, which still needs to be passed by the House of Commons.
This rebate structure is already incorporated into the federal carbon pricing legislation. The vast majority of refunds from the money collected through carbon pricing, around 90 per cent, go to households, with the updated structure for the new refund stating that five per cent will be go to small and medium businesses, and the rest will be returned to indigenous communities.
Environment and Climate Change Canada is still working with indigenous communities on how best to manage the return of those portions of the fuel charge earnings.
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The inclusion of the small business rebate in the federal budget follows a heated political debate over the latest increase in carbon prices from $65 per metric ton to $80 per metric ton. The opposition Conservatives and seven major leagues called for the increase to be at least delayed citing cost of living concerns.
In response, Prime Minister Justin Trudeau pointed to a March 2023 Parliamentary Budget Officer report saying that eight out of 10 Canadians receive more than they pay through the recently renamed Canada Carbon Refund, the share which goes to homes.
As part of the budget, a new amendment is being proposed to require banks to follow government naming conventions on direct deposits such as the Canada Carbon Refund. That would mean that banks would need to show the deposits that reach consumers’ bank accounts under that name.
What about other tax credits?
As part of the series of measures related to climate change in the budget, the government intends to implement the previously announced Clean Electricity Tax Credit, up to $7.2 billion over the first five years of the program.
Between 2029-30 and 2034-35, the government plans to increase the value of the tax credit to $25 billion.
The government’s goal is for Canada to have a net zero electricity belt by 2035.
In an effort to stimulate investment in low-emission electricity, this document seeks to establish a 15 percent tax credit for private companies to build new or expand production of wind, solar, hydroelectric, geothermal, waste biomass and nuclear energy.
The tax credit is also open to natural gas, as long as the project incorporates carbon capture and storage.
Some provinces, such as Saskatchewan, have Crown corporations that provide electricity generation. As outlined in the budget, these states are eligible to apply for the tax credit as long as they publicly commit to achieving net zero electricity by 2035 and pass on any savings to taxpayers by reducing electricity bills . The deadline for this is March 31, 2025.
This could add to the political battle on climate policy between Ottawa and Saskatchewan, as that province’s stated goal of achieving net zero electricity is 2050, 15 years after the federal target.
What’s new with home heating affordability schemes?
Home heating is another key driver of fuel charge revenue, with $903.5 million targeted at trying to reduce costs but most of this funding will not be in place until the next financial year.
The government plans to set up an $800-million program to provide direct funding for low- to middle-income households to install energy-efficient retrofits on their heating systems. This fund is expected to be delivered over five years, starting in 2025-26.
An additional $73.5 million is set aside to modernize various energy efficiency programs for apartment building owners, and $30 million to develop a standardized method of home energy labeling to help homebuyers better understand how efficient a property is.
Home heating became a key driver in the renewed opposition to the federal carbon price, when Trudeau announced a three-year pause on the carbon price for home heating oil. The pause applies nationally, but critics argue it disproportionately benefits Atlantic Canada.
This led to Saskatchewan ceasing to collect and pay the carbon price on home heating, and Statistics Canada said inflation has fallen in that province.
To coincide with the heating oil pause, Trudeau also promised to work with the provinces to help buy heat pumps for lower income households that use heating oil, as a way to reduce the intensity of emissions and the fuel charge on after the pause is over.
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The post After 5 years, Budget 2024 marks promised small business carbon refund – Global News appeared first on Canada News Media.
