Bill C-342 (Historical)

An Act to amend the Excise Tax Act (carbon levy)

This enactment amends the Excise Tax Act to provide that any tax paid to a province in respect of carbon is excluded from the total purchase price for the purpose of calculating the goods and services tax.

Excise Tax Act

[The Deputy Speaker, Bruce Stanton]

The hon. Parliamentary Secretary to the Government House Leader will have two and a half minutes remaining in his time when the House next resumes debate on the question.

The time provided for the consideration of private members’ business has now expired, and the item is dropped to the bottom of the order of precedence on the Order Paper.

The House resumed from June 8 consideration of the motion that Bill C-342, An Act to amend the Excise Tax Act (carbon levy), be read the second time and referred to a committee.

[Erin Weir, NDP, Regina—Lewvan, SK]

Mr. Speaker, the bill before us identifies a real issue, but proposes the wrong policy response.

My colleague from Langley—Aldergrove is correct to point out that the GST will apply on top of carbon pricing, and he is correct to be concerned that this cost will have a disproportionate impact on lower-income Canadians. However, the proposal to remove GST from carbon pricing is impractical. A far better solution would be to use those additional GST revenues to finance a rebate targeted to lower-income Canadians to offset the impact of carbon pricing.

Why do I suggest that it is impractical to remove the GST from carbon pricing?

I would first point out that the GST already applies on top of provincial fuel taxes. For example, my home province of Saskatchewan has a provincial fuel tax of 15¢ a litre on gasoline. My neighbour province of Alberta charges a very similar tax on gasoline, but it is divided up between a 13¢ provincial fuel tax and a 4% provincial carbon tax. Essentially, what the bill proposes is that the GST would continue to apply to the fuel tax, but for some reason, it would not apply to the carbon tax.

I do not think we have heard an explanation from the member for Langley—Aldergrove as to why we should apply the GST to a tax that is labelled a “fuel tax”, but not apply it to a functionally-identical tax called a “carbon tax”. If the bill were adopted and passed into law, provincial governments could all exempt their fuel taxes from the GST simply by renaming them “carbon taxes”. I think that is clearly not the intention of the member for Langley—Aldergrove, but it is a consequence of the proposed bill.

Even if there were a solution to that issue of existing excise taxes versus carbon taxes, there is absolutely no way to remove the GST that would apply to price increases arising from a cap-and-trade system. Carbon pricing is being rolled out in different ways across the country. Some provinces have enacted carbon taxes, which the bill addresses, other provinces have decided to put a price on emissions through cap and trade, which the bill does not address.

Therefore, again, it is unclear why we would seek to remove the GST from a price increase that results from a carbon tax, while continuing to apply the GST to price increases that arise from cap and trade.

Therefore, I think it is clear that it is not really feasible or desirable to try to remove the GST just from this one type of carbon pricing.

A far better solution would be to recognize that the government will inevitably collect additional GST when consumer prices are increased by climate change policies and then to use that money to provide a rebate to lower-income Canadians to offset the cost of carbon pricing. This is a practical solution that is already in effect in other jurisdictions.

For example, the progressive government of Rachel Notley in Alberta has enacted a very generous rebate program along with the carbon tax. In fact, the rebate in Alberta is so generous that many lower and middle-income Albertans actually have more money in their pockets now than they did before the carbon tax was enacted. Therefore, if the goal of the Conservatives is to help lower-income Canadians and shield them from the burden of carbon pricing, the way to do that is to transfer money to them directly. The Alberta government has already shown us how to do that.

I would also note in this vein that our new federal leader, Jagmeet Singh, ran on a platform that would “ensure that carbon pricing is twinned with rebates to make it more affordable and fair for low and middle income Canadians.” The solution is already there, and it is a better solution than the one proposed in this bill.

I would like to put a few numbers on the type of rebate we are talking about, because the GST that the federal government will collect could fund a significant amount of assistance to lower-income Canadians. By the year 2022, the federal government will be requiring a carbon price of at least $50 a tonne. Canada's current emissions are about 700 megatonnes, so we are talking about $35 billion of carbon pricing. Apply the 5% GST to that carbon pricing, and we are talking about additional revenues of $1.75 billion. That is a significant amount of additional GST revenue that will inevitably be collected on top of carbon pricing, frankly with or without this bill. If we use that money to boost the existing GST credit, we could increase it by one-third. The federal government needs to take advantage of the fact that it has this additional GST coming in from carbon pricing, and increase the GST credit, which is already based on income and already very well targeted to lower-income Canadians.

Once again, to sum up, we have a bill before us today that identifies a real issue, the application of GST on top of carbon pricing, as well as the disproportionate effect that could have on lower-income Canadians. However, the bill proposes an impractical solution. It talks about trying to take the GST off carbon taxes when the GST already applies to excise tax on gasoline, which is in effect the same type of tax. We should not be basing GST policy on the name of the tax; we should base it on real economic factors.

Furthermore, the bill does not even pretend to be able to address the GST that is collected on top of a cap and trade system. A far better solution is to accept the reality that if consumer prices increase as a result of putting a price on emissions, the federal government will collect more GST as a result. That will put the Government of Canada in a position to fund a rebate to lower-income Canadians to ensure they are not adversely affected by carbon pricing.

I would speak in opposition to the bill before us, but very much in favour of using the GST revenues from carbon pricing to fund a progressive rebate that would help to ensure we can use carbon pricing to reduce emissions while, at the same time, boosting the fortunes of lower-income Canadians.

[Jacques Gourde, Conservative, Lévis—Lotbinière, QC]

Mr. Speaker, I am pleased to rise today to take part in the debate on Bill C-342, which was introduced by my colleague, the hon. member for Langley—Aldergrove.

I have had the great privilege of representing my riding in the House since January 23, 2006, and my colleague and I have had the opportunity to work together in the interest of all Canadians in a way that respects the principle of tax equity, a principle that seems to have been forgotten since this Liberal government took office.

I want to begin by telling the people of Lévis—Lotbinière that the Conservatives will continue to fight the tax hikes imposed by this Liberal government, a government whose hypocrisy knows no bounds and that keeps breaking the promises that it made to honest, hardworking Canadians.

Bill C-342 will amend section 154 of the Excise Tax Act to exclude the collection of GST and HST on provincial carbon pricing systems. From now until the next election, the Conservatives will be the voice of the taxpayer, and we are proud to stand up for Canadians against this tax on the carbon tax.

This is no surprise to anyone. Our party has always opposed high taxes on Canadian taxpayers, and we oppose the Liberal government's unprecedented deficits and spending.

It is no secret that those who voted for a party other than ours are now looking at another option, and that option is the Conservative Party. Our previous Conservative government made it clear that the party respects taxpayers, our wallets, and each person's ability to pay. Our party does what it says and says what it does, in addition to helping Canadians make ends meet. Not only do we do all of that, but we also do so fairly, at no one's expense, and without mortgaging future generations to the hilt.

We hope that the Prime Minister is the only one in his generation to think that the world will end in 25 years and that Canadians will not have to pay down this massive deficit. Unlike the Liberal government, a Conservative government knows, in no uncertain terms, how to balance a budget and eliminate deficits.

The Liberal government's proposal shows the Liberal Party up to its old tricks. This is just another one of these Liberal shell games where Canadians always lose out. Does anyone believe the Prime Minister's claim that the government's new price on carbon will be revenue neutral? It is absolutely shameful that he should have the nerve to try to make the public believe this. He must always be looking for new ways to fill government coffers on the backs of hard-working Canadians so he can outspend our borrowing capacity by a factor of two, if not 10.

What does the Prime Minister take us for? Fortunately, not all of us blindly swallow everything the Prime Minister says in the House. It is patently obvious that by charging GST on top of the price of carbon, the Liberal government will be collecting billions in new tax dollars. Too bad they will not be able to make even more money off this revenue by stashing it in a tax haven, as their Minister of Finance is currently doing. Granted, that scandal is another matter altogether, but it is just one more in a long line of crooked Liberal manoeuvres that, sadly, always end with us losing out or getting the shaft.

This hidden tax is totally unconscionable, obscene, and unfair to Canadians. What is even more appalling is that it represents one more broken promise from this Prime Minister. Instead of taxing Canadians, and taxing the tax, as this unscrupulous government currently wants to do, the Conservatives believe that we need to lower taxes for Canadians, including taxes for businesses, families, and individuals. This is an integral part of the Conservative vision, a vision of prosperity and opportunities for all Canadians.

This bill's objective is very noble and laudable. We want two main things: we want to help the Prime Minister, as a matter of urgency, to keep his promise, and we want to prevent the Liberal government from collecting GST/HST on provincial carbon taxes.

Let us look back at the untruthful comments the Prime Minister falsely made on October 3, 2016:

Provinces and territories will be able to have a choice in how they implement this pricing. They can put a direct price on carbon pollution, or they can adopt a cap-and-trade system....

Whatever approach is chosen, this policy would be revenue-neutral for the federal government. All revenues generated under this system would stay in the province or territory where they are generated.

Budget 2016 included a 21% increase of GST revenue from 2015-16 to 2020-21, despite the fact that federal GST would stay at 5%. The amount of GST the federal Liberal government is currently collecting through carbon taxes for the 2017-18 fiscal year amounts to $65 million from Alberta and $65 million from British Columbia. In 2018-19, it is projected to be $140 million from Alberta and $110 million from British Columbia, and that is for just two provinces. Imagine how much the government will collect from across Canada. This will mean billions of dollars more unfairly taken away from Canadians through this double taxation.

Halfway through their mandate, the Liberals have an abysmal track record. According to a report by the Fraser Institute, 81% of middle-class families are paying more taxes under the Liberals. These are families that pay on average $840 more per year. That is a significant sum.

The Liberal tax hikes are hurting Canadian families and businesses. Among other things, they scrapped the universal child care benefit, fitness and children's art tax credits, post-secondary and textbook tax credits, as well as income splitting for families.

With respect to small businesses, it is thanks to the pressure applied by the official opposition that they will be paying less taxes, as set out in the Conservative plan.

The Liberals also halved the TFSA's contribution limit, scrapped the public transit tax credit, introduced an Uber tax, and raised taxes on beer, wine, and spirits.

They then tried to tax health and dental insurance benefits, as well as employee discounts.

Now the Prime Minister, in true hypocritical fashion, is asking middle-class Canadians to pay more to cover his reckless spending, all while his family's fortune remains intact. For shame.

The Prime Minister is failing in his duty and wasting Canadians' hard-earned money. So far he has used these massive tax hikes to pay for luxury vacations to tropical islands at the taxpayers' expense and to pay for a lovely book cover for the Liberals last budget.

Those who still believe that he is not going to raise taxes on Canadians are a rare breed, and they are tending to keep quiet on the issue. Canada does not have the luxury to pay for another Liberal government. This Prime Minister does not deserve to be reelected because he has already lost the confidence that many Canadians placed in him.

Next year, all my colleagues across the way will be allowed to smoke marijuana, but they will not be able to stonewall our ideas on this side of the House. Conservatives are strong, solid, lucid, and determined. Day after day, we will do what this Prime Minister and the Liberal government do not know how to do and that is work hard in the interest of all Canadians to build a strong, stable, and prosperous country.

The House resumed consideration of the motion that Bill C-342, An Act to amend the Excise Tax Act (carbon levy), be read the second time and referred to a committee.

[Joël Lightbound, Liberal, Parliamentary Secretary to the Minister of Finance]

Mr. Speaker, I am pleased to rise in the House today to speak to the bill introduced by the hon. member for Langley—Aldergrove.

Bill C-342 seeks to amend the Excise Tax Act to provide that any tax paid to a province in respect of carbon is excluded from the total purchase price for the purpose of calculating the goods and services tax. Even though I have no doubt that the hon. member has the best intentions in the world, this bill will not only not have an impact on Canadians' taxes, but it will also unnecessarily complicate our tax system.

Experience tells us that passing tax-related private members' bills can undermine the budgetary process and impede the Government of Canada's ability to prioritize public policy issues and urgent expenses when drafting a balanced series of budgetary measures.

Ideally, any changes to tax laws should be made as part of the larger budget process to ensure that they are consistent with the fiscal framework and the tax system. Before I provide a more detailed explanation of the steps and measures that the government has taken in this regard, I would like to talk about the implications of Bill C-342.

A key component of the government's pan-Canadian framework on clean growth and climate change is the commitment to put a federally regulated price on carbon pollution across the country in 2018. This commitment is based on the very basic principle of fairness under which every person or their representative must pay for what they use.

The provinces will be able to choose between two great options for implementing this initiative. The first is an explicit price-based system, for example, the carbon tax that is in place in British Columbia, or a hybrid system made up of a carbon levy and production-based pricing like in Alberta. The second option is a cap-and-trade system like those used in Quebec and Ontario.

The bill before the House would complicate things. Separating carbon taxes and levies from the total purchase price would make tax compliance more complicated and make the total purchase price less transparent.

Above all, this bill weakens our commitment to protect the environment more responsibly and fight climate change. The Government of Canada wants the tax system to be as fair and efficient as possible. If we want strong and sustainable economic growth that benefits Canadians as a whole, we must have in place a tax system that is fair for everyone, especially the middle class.

The GST/HST was always meant to be a consumption tax. Applying that tax to a broad range of goods and services not only makes it equitable, but also gives it the additional advantage of being simpler to manage and more efficient, which is undeniably of benefit to Canadian businesses and consumers.

Here is how the GST/HST works: it is calculated on the final sale price of many goods and services that Canadians consume and use every day. The final amount to which the GST applies generally includes other amounts charged, such as duties, the tobacco tax, and other gas and fuel taxes.

The main advantage of this general approach is that it is simple and predictable, which is better for Canadian consumers and makes it easy for Canadian businesses to calculate and collect the tax.

The final reason this bill does not achieve its goal is a financial one. When we look at the savings this bill would generate, we can see that not charging GST/HST on carbon taxes would have a negligible impact in the case of most fuels and little impact on buyers.

For example, eliminating the GST on the existing carbon tax, which is 6.67¢ per litre of gas sold in British Columbia, would bring the price of a litre of gas down by about 0.37¢, which is about 0.03% if the retail price is $1 per litre.

In Alberta, not charging the GST on the natural gas carbon tax, which will be an estimated $205 in 2018 for a couple with two children, would save about 85¢ per month, which adds up to $10.25 for that year.

Let us compare that to the major tax cuts we have introduced since December 2015. Nearly nine million Canadians are benefiting from the government's middle-class tax cut, and the new Canada child benefit means that about 300,000 fewer children are living in poverty now than in 2013.

That works out to a roughly 40% drop in Canada's child poverty rate. We also took non-tax measures to help Canadians retain more of their hard-earned money and plan for their future.

A year ago, the government took action to help people retire with dignity by strengthening the Canada pension plan. Thanks to a historic agreement between the federal government and the provinces, the maximum benefit will increase by about 50% over time. This real and meaningful action has a major impact on the lives of Canadians. This is in addition to our government's unprecedented investments announced in the last two budgets to help clean up communities and reduce their dependence on energy sources that cause air pollution, have harmful effects on the environment, and jeopardize our health.

We are continuing to work to develop a single, consistent, and comprehensive plan to improve the lives of the middle class and all Canadians, a plan that will yield better results than an ad hoc approach like the one proposed in this bill.

The tax treatment provided for in the bill we are discussing today is neither fair nor efficient. Furthermore, this plan is not consistent with the objectives and priorities we have set with respect to environmental protection. For these reasons, the government opposes this legislation.

[Jim Eglinski, Conservative, Yellowhead, AB]

Mr. Speaker, I am pleased to rise in support of the bill by the member for Langley—Aldergrove. Bill C-342 would amend the excise act so that the government cannot collect GST or HST on provincial carbon pricing systems.

Last year, the Prime Minister imposed a national floor price on carbon that would require all provinces and territories to have some form of carbon pricing by the year 2018. British Columbia, Alberta, Ontario, and Quebec have already introduced carbon pricing systems. Most other provinces are working to do the same before the 2018 deadline.

The Liberals have claimed that putting a price on carbon pollution is the best means of reducing greenhouse gas emissions. Before I go on, I want to remind everyone of a recent report tabled by the Commissioner of the Environment and Sustainable Development, titled “Progress on Reducing Greenhouse Gases”. It concludes that the minister's department did not make progress toward meeting Canada's commitments to reduce greenhouse gases. This brings into question the effectiveness of the carbon pricing scheme.

The fact is that the Liberals did not introduce carbon pricing to reduce the emissions. They introduced it to fund their excessive spending habits. I believe that Canadians are willing to pay their fair share of taxes. However, the government is demanding so much money from hard-working Canadians that soon there will not be any more money for them to take.

Despite promising that carbon pricing would be revenue neutral, the Liberals' 2016 budget projected a 21% increase in GST revenues from the 2016 to 2021. Why? The GST rate didn't change in those calculations. What did change was the massive growth in taxable consumption of carbon, via carbon pricing.

The carbon tax is just that, simply another tax. The carbon pricing scheme isn't revenue neutral because it increases costs down the line and will increase the cost of the GST and HST on consumers and businesses. That is exactly why I believe this bill is necessary.

If the government wants to keep its promise to make carbon pricing revenue neutral, it needs to support this bill. Otherwise, it will be taking billions of dollars from hard-working Canadians because of this tax on a tax. Canadians are being taxed enough. This is just another Liberal tax grab designed to make Canadians pay for the Prime Minister's out-of-control spending habits and his resulting legacy of deficits that our grandchildren and children will have to pay.

Consumers and businesses are finding it more and more difficult to survive under the Liberals. The Liberals say that carbon pricing will force businesses to be more environmentally friendly by raising their operating costs. However, those costs will just be passed down to the consumer.

If someone wants to take their family on a Christmas vacation, it will be more expensive because airlines will pass that cost down to the consumer. Carbon pricing will not change how many gallons of fuel it takes to get from one city to the next. If it does, it will probably be because they have invested in more fuel-efficient technology. That is already in their interest to do because it saves them money. They do not need a carbon tax imposed on them to tell them to be more efficient. They are already trying to be.

A carbon tax targets generally taxes emissions from the burning of fuels like coal, petroleum, and natural gas in the hope of discouraging their use. While these fuels produce emissions, they are needed by us to drive our cars, heat our homes, and produce our electricity. The problem is that it does not matter how much these fuels cost us, because we still need to consume them every day, and winter is coming. It does not matter how much it will cost to fill up a gas tank, because many of us still have to drive. It is a half-hour from one end of my riding to the other. I am definitely not going to walk.

It does not matter how much our electricity bills go up, we still have to heat our homes. I have to plug in my vehicle in the wintertime or I will not get back to the house. My riding of Yellowhead is full of oil and gas fields. It is not like in those questionable documentaries where we see a massive hole dug into the earth with no signs of life for miles. The oil and gas leases are scattered throughout the forests and farmland, and are most often just a small teardrop of gravel with a small building or shack on top of the well.

Each company has an operator that has to check on each of these leases every day to make sure they are functioning properly. Additionally, they have to bring in water trucks and other service vehicles to maintain these leases. This is all necessary to ensure compliance with environmental regulations and the safe functioning of wells. Even though carbon tax makes it more expensive to operate and drive to each of these leases every day, the companies cannot decrease their safety oversight and well maintenance. They have to pass the cost on to the consumer at the pump.

As well, a carbon tax is a huge hit to the Canadian farm sector, which relies on these fuels to plant the crops that grow the food we eat. CIBC noted that some experts say that the total additional cost to a farm would be $6 an acre. For someone who has planted 1,000 acres of oats, that is $6,000 more in fuel costs to that farmer. When the cost to farmers goes up, so does the cost of food to consumers. Again, we are just paying again.

I also want to draw everyone's attention to another issue. I have said that the cost from carbon pricing is passed down to the consumer, making the cost of living more expensive. However, some businesses are forced to absorb the blow at the bottom line, jeopardizing the future of these businesses and jobs they provide, all while doing nothing to impact their emissions.

For example, in the auto body industry, companies do not set their own prices. If a person gets their car into accident and needs to get it fixed, their insurance company decides how much it should cost and dictates that to the auto body shop. They tell the auto body shop how much to charge, even though the insurance company does not know the overhead costs of that body shop. This is unfortunately the way insurance systems are set up.

In speaking with one owner near my riding, I learned that suppliers have passed the cost of carbon pricing on to his company. The insurance companies dictate how much he can charge and there has been no increase provided to offset the costs of the carbon tax. It is out of his pocket, the bottom line. Considering that about 90% of his work comes from insurance, his operating costs have increased by 12%, and that comes completely off his bottom line. What does that mean? It means choked growth and maybe staff cuts.

When the Alberta carbon pricing took effect in January, it just so happens that there was an increase in gas prices at the same time. The gas bill for this person's shop went from $500 a month to almost $1,600 a month. He went to his MLA to find out why, and found out that GST collected on top of the provincial carbon tax was the major factor. That is exactly why this bill is important. Small businesses and consumers alike are seeing their costs skyrocket under this Liberal government.

As representatives, it is our duty and responsibility to ensure each of our constituents can afford their groceries, to heat their homes in the middle of January, and to keep providing jobs for their communities. No one should ever have to be let go from a job because their company is being taxed to death.

The Liberal government will collect billions in new tax dollars as a result of charging GST on their mandatory price on carbon. This shameless tax grab is unfair to Canadians, and it is not what the Prime Minister promised, which was to keep the price on carbon revenue neutral. I call on those sitting across from me today and to all of their colleagues to support this bill and help the Prime Minister keep his promise to Canadians.

[Mark Warawa, Conservative, Langley—Aldergrove, BC]

Mr. Speaker, I want to thank God for this opportunity to have a private member's bill. I was number 71. A vast majority of members of the House do not get a chance to present a bill. It is around 45 bills a year. Two years and I now have the opportunity to close debate on this important bill.

I also want to thank Megan, Liat, MacKenzie, and Maksym in my office in Ottawa for their support in preparing for today. I want to thank Annette, Rebecca, and Jane who are in my riding for their support. Of course, I want to thank my wife, Diane. We have been married 45 years this month. I could not do this job without her wisdom and her support.

It is important to have a bill that means something. I consulted with my constituents and overwhelmingly I heard support for Bill C-342, which fundamentally states that it is wrong and it is unfair to charge taxes on taxes. Canadians understand that. Unfortunately, many in the House do not.

The government has a legacy of broken promises, saying one thing and doing something else. We just heard that the tax would have negligible effect on the tax burdens of Canadians. That is not true. This year, $130 million are being taken out of the economy of British Columbia and Alberta through GST on the carbon taxes in those provinces. The Prime Minister said that it would be federally revenue neutral and that this was good for the environment. We all want to do our share for the environment. We all want to be fair. However, what we were told and what actually is the truth are two different things.

This year $130 million will be sucked out of Alberta and British Columbia. Next year, it will be $250 million, and that is just for the western provinces. When this carbon tax, as mandated by the Prime Minister, comes into effect, billions of dollars every year will be sucked out of the economy just in GST.

The Liberals say that we need fairer taxes and that it will not be fair to not tax a tax on tax. That is really hard for me to grasp, and I really do not even want to try to grasp the fact that it is fair to charge taxes on taxes and that to stop this will be unfair. The GST is a tax on goods and services. Is a carbon tax goods? No. Is it services? I guess in the mind of Liberals a tax is a service to Canadians. However, Canadians do not believe that. It is unfair to charge a tax on tax.

The Prime Minister promised it would be revenue neutral. This is what Canadian media is saying.

Tim Powers of Power & Politics said that it was not revenue neutral when applying a second tax, that more money actually would come into the federal coffers. We have seen that in the budget. We are talking billions of new dollars coming into the federal coffers in the GST. The GST would be charging tax on tax. Rosemary Barton from CBC said that it was not really about what it would cost the consumer; it was about the government's claim that it would be revenue neutral, and it was not. Ian Capstick said that it was not neutral, that it was profitable to the federal government.

Canadians get it. The media get it. Unfortunately, my colleagues across the way do not get it. It is not fair to charge a tax on tax. I hope the House will do the right thing and support Bill C-342.

[The Deputy Speaker, Bruce Stanton]

The question is on the motion. Is it the pleasure of the House to adopt the motion?

[Some hon. members]

Agreed.

No.

[The Deputy Speaker, Bruce Stanton]

All those in favour of the motion will please say yea.

[Some hon. members]

Yea.

[The Deputy Speaker, Bruce Stanton]

All those opposed will please say nay.

[Some hon. members]

Nay.

[The Deputy Speaker, Bruce Stanton]

In my opinion the nays have it.

And five or more members having risen:

Pursuant to Standing Order 93 the recorded division stands deferred until Wednesday, October 25, immediately before the time provided for private members' business.

It being 2:13 p.m., the House stands adjourned until next Monday at 11 a.m. pursuant to Standing Order 24(1).

(The House adjourned at 2:13 p.m.)