I am responding to your emails of July 11 and August 30 to the Honourable Gordon Campbell, Premier, regarding your concerns about the application of the federal goods and services tax (GST) to the carbon tax. Please accept my apology for the delay in response.
It is the Federal Government of Canada that determines the GST base - i.e. the goods, services, taxes and fees to which the GST applies.
Generally, the federal GST applies to a broad range of goods and services and is calculated on the final price charged for the good or service – including any federal, provincial or municipal taxes, levies or charges, with the exception of general provincial sales taxes and land transfer taxes.
Provincial sales taxes (PST) are percentage-based taxes calculated on the selling price of goods. British Columbia did not have the option of structuring the carbon tax as a provincial sales tax to avoid the GST because a carbon tax, by definition and design, is intended to tax the carbon dioxide equivalent (CO2e) emissions which result from the use of fossil fuels and therefore must be on a measurement basis (e.g. per litre of gasoline, per tonne of coal, etc).
A percentage-based tax on the price of the fuel would result in the amount of tax depending on the price of the fuel, rather than on the CO2e emissions the carbon tax is designed to tax. For example, if there were a ten percent provincial “carbon” sales tax, a person would pay ten cents in tax for each litre of gas purchased when gas is $1/L, and 20 cents when gas is $2/L. As a litre of gasoline contains the same amount of CO2e regardless of its price, this type of tax would not effectively target CO2e emissions.
Imposing a percentage based carbon tax could also result in the CO2e emissions associated with different types of fossil fuels being taxed differently because the market prices of those fuels do not reflect the associated emissions.
As it is up to the federal government to decide how to apply the GST, any questions about why the GST applies to a particular item, such as the carbon tax, should be directed to the federal Minister of Finance at:
The Honourable James M. Flaherty
Minister of Finance
Department of Finance Canada
140 O'Connor Street
Ottawa ON K1A 0G5
Or you may wish to contact Minister Flaherty by email at: jflaherty@fin.gc.ca. Alternatively, you may wish to contact your federal Member of Parliament.
The British Columbia government did ask the federal government to give the province back the net GST collected on the carbon tax so that it could be returned to British Columbians through provincial tax reductions. Minister Flaherty, the federal Minister of Finance, responded that British Columbia’s carbon tax will be included in the GST base and that the federal government will not be returning the GST collected on the carbon tax to British Columbia.
Ministry Flaherty indicated that the carbon tax will be included in the GST base because, to simplify understanding and compliance, it is a general rule that federal, provincial and municipal taxes, levies and charges are included in the value on which the GST applies. The reasons Minister Flaherty gave for his decision not to return the GST paid on the carbon tax are that giving British Columbia the money could result in similar requests by other provinces and that the GST revenues are used to fund a number of important programs and services for Canadians.
With respect to you asking if the PST would apply to a federal carbon tax, that is a decision the government would have to make. However, the PST does not apply to federal excise taxes on gasoline, diesel or other motor fuels and does not apply to fuels used for residential heating.
Thank you for writing.
Sincerely,
Colin Hansen
Minister of Finance
cc: Honourable Gordon Campbell, Premier
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Don Quixote Note: I receive this e-mail at 3.09 PM Today. I have also asked for the Gov. of Canada's position by e-mailing PM Harper and Finance Minister Flaherty. No answer yet but Mr. Flarety has obviously replied no to the Provincial Request to return the GST to the Province.
Contrast Flaherty's answer with the answer I got from our local M.P. Colin Mayes
09/26
Thank-you for the email. Our Party does not have a position on this but I can tell your that I do not believe in tax on tax of any kind. If a bill comes forward I will vote in favour of dropping the tax on the B.C. carbon tax. I will also after elected request that the Minister of Finance support this position.
I do not believe in any carbon tax, but if Provincial Government impliments a carbon tax I do not think a government that does not believe in a carbon tax should collect tax on something they do not believe in. This is my opinion only.
Colin Mayes
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