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What you need to know about Ontario's Carbon Tax rebate

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Kathryn Kyte Mar 15, 2019 1:36 pm 1,506

The Federal government’s Carbon Tax comes into effect on April 1, and will soon tax Canadians across the country, including small businesses, families and seniors.

The tax is meant to encourage more environmentally and energy efficient practices, and the burning of fossil fuels, which produces carbon, will, in turn, be made more expensive. Alternatively, carbon-free alternatives will be made cheaper.

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As part of the Federal Liberal government’s climate plan, provinces were required to implement plans to reduce emissions with the deadline to confirm these plans set for September 2018. British Columbia and Alberta are among the provinces that already have a carbon tax in place. Come April 1, the federal government’s new tax will be slapped on all provinces and territories that have failed to make an emissions reduction strategy and pricing plan.

To give some figures: the carbon tax will increase the price of natural gas in Ontario by 4.4 cents per cubic metre. This number will further rise to 6.6. cents in 2020, 8.8 cents in 2021 and 11.1 cents per cubic metre in April 2022, according to the Office of the Ontario Premier.

The charge to fossil fuels in Ontario will result in an estimated increase of five cents per litre for gasoline including the additional HST cost. This will rise to 7.5 cents in 2020, 10 cents in 2021 and 12.5 cents per litre in April 2022.

Climate action incentive

Ontario is one of four provinces that will receive a basic Climate Action Incentive tax rebate. Saskatchewan, Manitoba and New Brunswick residents will also receive this rebate on their 2018 personal tax return.

Why? These provinces did not create a carbon tax plan that met the federal government standard, so a tax will therefore be levied.

“Canadians can expect a rebate of $154 for individuals, while a couple will have a combined amount of $231 ($154 + $77). For each dependent child, the CAI amount goes up by $38. So a couple with three children under the age of 18 will receive a CAI rebate of $345,” explains chartered professional accountant (CPA) Varun Sehgal. “The personal tax rebate is a form of redistributing that carbon tax collected from the businesses to the individuals.”

The highest rebate is seen in Saskatchewan where a family of four (a couple with two kids) will get back $609. A family of four in Ontario, by contrast, will receive $307. Basically, Canadians filing their taxes in these four provinces will receive a rebate anywhere between $154 to over $300 depending on family size. Even if someone files a nil return (one’s income falls below the taxable income) they will get back the CAI.

The rebate is being offered in advance of the April 1 start date “to somewhat offset the increases in cost of living that residents of these provinces will see after the carbon tax is rolled out,” adds Sehgal.

Also, those living in rural and small communities will get an additional supplementary amount (10%) to the baseline Climate Action Incentive payments. This is done because Canadians living in these areas have less access to alternative energy and transportation options.

The provinces that do not receive this rebate are not necessarily worse off, says Sehgal. The carbon tax will not be levied in such provinces so the cost of goods for residents of those provinces will not rise either.

Provincial push back

Ontario’s Made-In-Ontario Environment Plan, which promises to reduce the provinces emissions output by 30% by 2030 without imposing a carbon tax, did not meet the mark for government approval.

Ontario Premier Doug Ford continues to fight the federal carbon tax and said on Wednesday that “a carbon tax will make no difference to the environment” and instead it will “drive up the cost of gas for your car, home heating for your family and the cost of getting food to your grocery store shelf,” during a tour of Challenger Motor Freight in Cambridge, Ontario.

Saskatchewan Premier Scott Moe is also challenging the federal government, arguing that Ottawa’s plan is unconstitutional since it does not respect provincial sovereignty and there isn’t a national rollout with the same tax figure. Moe has asked the federal government to refrain from imposing the carbon tax next month until the Saskatchewan Court of Appeal rules on whether the tax is constitutional. Moe issued this court battle with the government of Canada in February.

Federal response

The federal government stands strong in its position on climate-change-causing pollution. During a conference on March 13 in Hamilton, Ontario, Canada’s Environment Minister, Catherine McKenna, said the federal government is “putting a price on pollution” and that the government is “going to give the money back.”

According to McKenna, approximately 90% of the revenues from the country’s carbon plan will be returned to residents through the Climate Action Incentive rebate.

Prime Minister Justin Trudeau has previously said that “Canadians know pollution isn’t free,” and that “we’re all in this together.”

Provinces on board

British Columbia, Alberta, Quebec, Nova Scotia, Newfoundland and Labrador, and the Northwest Territories all have their own pollution pricing solutions. These systems complied with federal requirements. Prince Edward Island has its own plan too, but will adopt further federal requirements, and Nunavut and the Yukon have agreed to the federal price on carbon and the government’s approach.

In the case of BC’s revenue-neutral carbon tax, some research suggests that this tax has cut emissions by five to 15%. There’s also research showing BC’s tax and push to natural gas consumption has increased employment.

Regardless of what side you fall under one thing is certain: residents in Ontario, Saskatchewan, Manitoba and New Brunswick can receive a rebate when filing their 2018 personal tax return.

“Make sure you ask your tax preparer that they checked off the box to get you the rebate,” reminds Sehgal. “Also, this rebate can be claimed by either spouse for the whole family. As such, when filing taxes, let your tax preparer know which spouse to apply under.”

If you file online, make sure to pay attention to prompts and check off the appropriate box to receive the Climate Action Incentive rebate.

For more information about the carbon tax rebate in each province see below.

  1. Ontario
  2. Saskatchewan
  3. Manitoba
  4. New Brunswick
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