Mr. Speaker, 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 the most efficient means of reducing our greenhouse gas, or GHG, emissions, which is why the Government of Canada continues to make sure that it is not free to pollute in Canada.
The federal price on pollution is revenue neutral for the federal government; all of 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.
The Goods and Services Tax/Harmonized Sales Tax, or GST/HST, is calculated on the final amount charged for a good or service. The general rule that was adopted at the inception of the GST, in 1991 under prime minister Brian Mulroney, 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. As such, the final amount charged could include an amount attributable to the federal fuel charge. 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.
The incremental GST/HST revenues from the embedded federal fuel charge in the final price of goods and services are not available. The extent that the fuel charge is passed onto consumers will vary by type of goods and services, and the GST/HST is not applicable on some types of supplies, like basic groceries. This makes it difficult to precisely determine the additional GST/HST revenues from the federal fuel charge. Moreover, the government does not track the amount of GST/HST that is collected for each type of good or service that a vendor may sell. When firms remit the GST/HST that they have collected on their taxable sales, they report and remit to the Canada Revenue Agency only one single amount for all jurisdictions. Requiring vendors, like small businesses, to track GST/HST collected on the individual types of goods or services they sell by jurisdiction would impose a significant reporting burden on them.
The government reports the direct fuel charge proceeds collected and returned annually through the Greenhouse Gas Pollution Pricing Act Annual Report. For more information on the proceeds collected and returned, please see the Annual Report for 2022 at the following website: https://publications.gc.ca/site/eng/9.893583/publication.html.