CFIB says Ottawa sitting on $2.5 billion in carbon tax rebates owed to small business, farmers and First Nations since 2019

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Ryan Kiedrowski, Local Journalism Initiative Reporter, The World-Spectator

While a promise to distribute a percentage of carbon tax revenue back to small businesses, farmers and Indigenous people was made nearly a year ago, the money has not been distributed.That’s what the Canadian Federation of Independent Business told the World-Spectator, and said they are wondering exactly when the feds will make good on their promise.

“There is over $300 million that is owed to small-to-medium sized businesses in Saskatchewan alone,” said Brianna Solberg, CFIB director for the prairies and northern Canada. 

“And yet, there is still no mechanism in place to return a dime to small businesses paying the federal carbon tax.”Solberg says despite attempts to contact the powers that be, silence was their only answer. 

“Their timeline, after announcing the program, was to find a third party by spring of 2023 and that third party would be the one to distribute these funds, but there’s been no update now,” she told The World-Spectator. 

“2023 has come and gone. We’ve even reached out to the federal government on this issue.”

Adding to the frustration is a projected carbon tax increase to $80 per tonne effective April 1.“We’re also concerned that, with the carve-outs that we’ve seen in Atlantic Canada, we’re concerned that this money is being used to help fund those carve-outs,” Solberg said. “We want to make sure that’s not the case.”

Since 2019, the federal government has collected $2.5 billion in carbon tax revenue. The CFIB estimates small businesses pay 40 per cent of the costs associated with the tax, but were only promised 10 per cent of those revenues.

“While the federal government charges carbon taxes to all small businesses, they plan to rebate only a select few in emissions-intensive and trade-exposed sectors, whatever that means,” Solberg added.

Extra salt in the wound can be found for those businesses who did not meet the deadline for the Canada Emergency Business Account loans on Jan. 18, who now face an extremely difficult future, she said. “We had thousands of members tell us that they wouldn’t be able to pay back on time and sure enough, 25 per cent of businesses who took out a CEBA loan weren’t able to pay it back by the deadline,” Solberg said. 

“So now they’re accruing interest. We’ve seen many close their doors already,” she continued. 

“I think 2023 was a record year for business insolvencies—the highest over the last 13 years—and I think a 41 per cent increase in business insolvencies in 2023 compared to the year prior. Which also is just kind of the tip of the iceberg because many businesses will just close their door without filing bankruptcy.

”The CFIB is asking the federal government to return the $2.5 billion owed to small business in Ontario, Alberta, Manitoba and Saskatchewan; create a rebate formula to return the 10 per cent of ongoing carbon tax revenue quarterly, with a plan to increase the rebate to 40 per cent; reject Senate amendments on the passing of Bill C-234; freeze the carbon tax; and exempt all heating fuels.

“We’re calling on Ottawa to take some concrete action and do more to help small businesses facing financial hardships. The government can show small firms that it’s listening to them by freezing the carbon tax while fixing the broken carbon backstop system,” concluded Solberg.

In response, the Ministry of Environment and Climate Change reiterated the importance of small business and commented on the lack of carbon tax rebates towards them.

“The Government of Canada is committed to ensuring the success of small- and medium-sized businesses, which are the backbone of the economy,” said Cecelia Parsons of the ministry. “That is why there are a range of supports in place to help SMEs in Canada and why the Government cut the small business tax rate from 10.5 per cent to 9 per cent, giving us the lowest tax rate for SMEs in the G7.”

According to the Canadian Federation of Independent Business, in excess of $300 million remains owed to small-to-medium sized businesses across Saskatchewan alone, and $2.5 billion across the country in carbon tax rebates.

“In developing the carbon pollution pricing system in Canada, the Government of Canada made special provisions to help small- and medium-sized businesses, by allocating a portion of all revenues to be returned specifically to them, in jurisdictions where the federal backstop system applies,” Parsons said.

“All federal fuel charge proceeds are returned to the jurisdiction of origin, including the amount allocated for SMEs, through programming currently under development, as specified by the Minister of Finance in late 2022. The Government of Canada is preparing to return over $2.5 billion of fuel charge proceeds to emissions-intensive and trade-exposed small and medium-sized enterprises by the expected deadline.”

The $2.5 billion Parsons spoke of is the amount of carbon tax revenue collected since 2019. A third party group was supposed to distribute those funds last spring, but the CFIB has not been updated if such an entity exists. When the Minister of Finance announced in 2022 that the funds would be returned, it was indicated that the process would begin in 2023.

“The first phase of these return programs will distribute approximately $2.5 billion of fuel charge proceeds to emission-intensive and trade-exposed small- and medium-sized businesses in Alberta, Manitoba, Ontario and Saskatchewan,” Parsons confirmed. “This comprises proceeds collected in the four provinces in the 2019-20 to 2023-24 fiscal years.”

Eastern provinces are promised money in the next phase of payments, but no date has been set for that payout either.

“The second phase of the return programs will distribute $70.1 million of fuel charge proceeds to emission-intensive and trade-exposed small- and medium-sized businesses in New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island,” exlained Parsons. “This comprises proceeds collected in the four Atlantic provinces in the 2023-24 fiscal year.”

While timelines have not been established yet, Parsons assures “the Government of Canada is working hard to launch these fuel charge return programs.”