Ottawa short-changed small businesses on carbon tax rebates, says taxpayer group

According to a taxpayer advocacy group, governments have shortchanged small businesses on the carbon tax rebates promised five years ago.

On Wednesday, the Canadian Federation of Independent Business (CFIB) calculated rebates to date are a fraction of what operators pay in higher fuel costs, reported Blacklock's Reporter.

Despite collecting billions in carbon tax revenues, Ottawa returned less than 1% of the promised proceeds to small businesses, according to the federation. 

In addition, the federal government is proceeding with a carbon tax hike of 23% to $65 per tonne on April 1. 

Cabinet in 2018 promised to pay rebates to small businesses under its carbon tax bill, the Greenhouse Gas Pollution Pricing Act. 

"Action on climate change is not a gimmick," said then-environment minister Catherine McKenna.

In 2019, the feds introduced a price on carbon pollution, starting at $20 per tonne and increasing to $50 per tonne in 2022. This April, Ottawa is expanding the tax to $65 per tonne with successive increases until 2030, reaching $170 per tonne.

Prime Minister Justin Trudeau claimed last week the carbon tax puts more money in the pockets of Canadians.

"We're fighting climate change while standing up for families and growing the economy through pollution pricing," he said.

However, CFIB data shows over half (52%) of small firms oppose carbon pricing. If the price of carbon increases to $170 per tonne in 2030, over half (56%) of small businesses said they would have to increase their prices to offset costs.

Over four in ten (45%) said it would increase pressure on them to freeze or cut salaries and wages, while 40% said they would have to reduce investment in their business.

"Our research shows business owners care about the environment and take proactive steps to reduce their environmental footprint. But to date, they have received little or nothing in carbon tax revenues from the federal government," said CFIB senior policy analyst Taylor Brown. 

"Businesses want their money back."

In 2019, the Department of Environment promised an initial $155 million in rebates for small businesses, according to Blacklock's Reporter. The figure fell to $150 million, and its scope was limited to subsidizing the purchase of electric vehicles, high-efficiency appliances and building refits.

In a report called Fueling Unfairness: Carbon Pricing And Small Business, the federation said promised rebates never materialized. They are calling on Ottawa to reconsider the federal carbon pricing backstop. 

"While Federation calculations estimate small firms pay close to half the carbon tax revenue collected by the government, only 0.17% of all carbon tax revenues were returned to small businesses between 2019 and 2023," it said.

The federal government raised $22 billion in carbon pricing revenues between those years. With the carbon tax increasing to $65 per tonne, about $8.2 billion is expected to be collected from the carbon tax alone in 2022-23.

"The federal government must act now to provide immediate relief to small businesses in Canada," said Dan Kelly, CFIB president. "Freezing the carbon tax while the government focuses on fixing the broken backstop approach would be welcome news in the 2023 budget."

The advocacy group recommended Ottawa reconsider its carbon pricing strategy with a focus on technology and other approaches to reduce greenhouse gas emissions.

If not, they suggested the following:

  • Freezing the federal carbon pricing backstop at the current level.
  • Immediately returning $2.5B in federal carbon tax revenues it has collected from small businesses since 2019.
  • Ensuring all future carbon tax revenue collected from small businesses is returned through simplified rebates or tax reductions.

"Increases in the carbon tax coupled with minimal compensation are making the cost of doing business substantially higher, negatively impacting thousands of businesses," said Unfairness. 

"Three in five small businesses have seen their overall energy costs increase substantially, over ten percent, in the last year while the majority have used the same amount of energy as in previous years."

"Small businesses in Canada are already struggling with increased costs, and the carbon tax is adding to their burden," said Jasmin Guénette, Vice-President of National Affairs at CFIB.

"The government must take immediate action to provide relief to small businesses by freezing the carbon pricing backstop and making the promised federal carbon tax proceeds readily available."  

Small businesses contribute significantly to the federal carbon tax but get a different amount back than individuals and households through rebates. 

"It's all stick and no carrot here," MP Pierre Poilievre then-Conservative finance critic, told a 2019 hearing of the Commons finance committee, as reported by Blacklock's Reporter.

"Where is the carrot for the small business person?"

"When these small business people come into my office and say, 'My costs are going up, I have to lay someone off or cut someone's pay,' I'll say to them that someday the government is going to announce a program whereby they can fill out a form and maybe staple on their receipts from gas and other expenses that have gone up, and maybe someone in Finance Canada or Environment Canada will reply to them and say, 'Thanks for your letter,'" said Poilievre.

"The government is developing the specifics," testified Samuel Millar, then-director general of corporate finance for the Department of Finance. "It's under development."

Cabinet, last November 22, promised a Fuel Charge Proceeds Return Program to pay small business rebates by 2025. Payouts would be "direct payments to eligible small and medium-sized enterprises, specifically those in emissions-intensive and trade-exposed sectors," it said.

According to the CFIB, small businesses in Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island will move under the federal carbon pricing system on July 1, 2023, like their counterparts in Alberta, Saskatchewan, Manitoba and Ontario.

During a recent press conference, Trudeau said the average family of four in Bridgewater, Nova Scotia, would receive a climate action incentive cheque worth $272 every three months, starting in July.

"That's over $1,000 a year and more than makes up for the extra costs because of the carbon price," he claimed, adding, "this is how you fight climate change."

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