Clients in B.C. are paying higher taxes without knowing it. And soon, all Canadians could be.
That’s because a study by the Fraser Institute reveals the province’s carbon tax isn’t revenue neutral, as originally designed. And, as other provinces follow suit, Canadian taxpayers across the country could be similarly affected.
By 2018, the federal government requires all provinces to adopt a carbon pricing system.
As it stands, taxpayers in B.C. could be paying almost $900 million more in taxes over a six-year period, finds the study.
When the carbon tax was introduced in 2008, the B.C. government offset the new revenue with cuts to personal and business tax rates and a new tax credit for low-income earners.
Five years later, however, the government no longer provided new tax cuts to offset additional carbon tax revenue. Instead, starting in fiscal year 2013/14, the government started counting existing tax credits as offsets — credits that pre-dated the carbon tax.
That violates the basic principle of revenue neutrality, says Charles Lammam, director of fiscal studies at the Fraser Institute, in a release.
Once the pre-existing tax reductions are excluded, B.C. taxpayers paid $226 million in increased taxes in 2013/14 and $151 million in 2014/15, reveals the study.
The carbon tax is projected to result in a cumulative $865 million tax increase on taxpayers through fiscal year 2018/2019.
Read the full study here.