441-00532 (Taxation)

Climate change is an existential challenge, and climate action is critical to Canada’s long-term health and economic prosperity. Carbon pricing is widely recognized as effective and the most efficient means of reducing our greenhouse gas emissions, which is why our government has made sure that it is no longer free to pollute in Canada.

The federal price on pollution is revenue neutral for the federal government; the direct proceeds from the federal carbon pricing system remain in the province or territory where they are collected. Put simply, every dollar collected from the carbon price is returned.

In Prince Edward Island, Yukon, and Nunavut, the direct proceeds from the federal system are returned to the governments of these jurisdictions. In provinces that do not have a fuel charge consistent with the federal benchmark—Ontario, Manitoba, Saskatchewan and Alberta—approximately 90 percent of direct proceeds are returned to residents of those provinces through Climate Action Incentive (CAI) payments. Most households receive more in CAI payments than the costs they face from the federal price on pollution.

In 2022-23, these payments mean a family of four will receive $745 in Ontario, $832 in Manitoba, $1,101 in Saskatchewan, and $1,079 in Alberta. In addition, families in rural and small communities are eligible to receive an extra 10 per cent.  Climate Action Incentive payments will begin to be delivered as quarterly payments starting July of this year instead of a refundable credit claimed annually on personal income tax returns.

The remaining fuel charge proceeds are used to support small businesses, farmers, Indigenous groups, and other organizations.  Going forward, the federal carbon price will continue to be revenue neutral for the Government of Canada.

With respect to the application of the Goods and Services Tax/Harmonized Sales Tax (GST/HST), the GST/HST is calculated on the final amount charged for a good or service.  The general rule that was adopted under Prime Minister Mulroney at the inception of the GST, and carried over for the HST, is that this final amount includes other taxes, levies, and charges that apply to the good or service and are generally embedded in the final price.  This longstanding approach to calculating the GST/HST ensures that tax is applied evenly across goods and services consumed in Canada.  It also makes it easier for vendors to calculate the amount of tax payable, for consumers to understand, and for the Canada Revenue Agency to administer.