Legislation in Alberta has been proposed to repeal parts of the province's carbon tax, effective 30 May 2019.
The repeal (proposed by the newly elected United Conservative Party as part of their election platform) would be one of several provincial tax measures expected by Alberta's new government. Additional legislation to implement other election tax promises, including a decrease to its general corporate tax rate to 8% (from 12%) over four years, could be expected.
The legislation to repeal the province's carbon tax is included in Alberta Bill 1, which received first reading on 22 May 2019. The bill would not eliminate the carbon pricing on "large emitters” but the rules applicable to large emitters would be revised to reflect a new technology innovation and emissions reductions (TIER) regime.
Alberta joins Ontario, Manitoba, Saskatchewan, New Brunswick, Nunavut and Yukon as provinces and territories that have chosen not to enact provincial carbon tax rules that meet the federal standard and therefore may be subject to the federal carbon tax "backstop" rules if the federal government includes Alberta in the federal program.
Although Alberta announced that it intends to launch a legal challenge if the backstop is applied in the province, Saskatchewan recently lost a similar court decision on the constitutionality of the federal rules.
In 2018, Canada’s Finance Department released carbon tax legislation and details of a related regulatory framework that will apply to any province or territory that did not implement a carbon pricing system that meets the federal standards by March 30, 2018. The federal carbon pollution pricing backstop includes fuel charges applied to fossil fuels, as well as a pricing system for industrial facilities that emit greenhouse gases above a certain threshold. Finance noted that when a province enacts a fuel charge that does not meet the federal thresholds, the backstop will "top up" the provincial system to the federal level.
The federal carbon tax rules impose a fuel charge at $20* a ton for 2019, which will increase $10 per year until it is $50 a ton in 2022. The levy will apply to fuels used in a jurisdiction (regardless of whether produced in or brought into the jurisdiction). Fossil fuels that are subject to the federal levy include liquid fuels (e.g., gasoline, diesel fuel, and aviation fuel), gaseous fuels (e.g., natural gas) and solid fuels (e.g., coal and coke). The fuel producer or distributor at the top of the supply chain will generally have to pay/collect the levy to the Canada Revenue Agency on a monthly basis.
Generally, facilities that emit 50 kilo-tons or more of greenhouse gases per year will be subject to the output-based pricing system. These facilities will be able to purchase fuel levy-free, and will instead pay a carbon price on emissions of $10 a ton, which started in 2018 and will also increase $10 per year until it reaches $50 a ton in 2022.
Finance also announced relief measures to offset the costs of these new federal charges.
Alberta's new legislation would repeal the existing Climate Leadership Act. The new rules also would provide that certain taxpayers who already made payments under the program may be eligible for reimbursement by filing a report on or before 29 June 2019.
Although Alberta's government did not announce specific details about its plans to introduce TIER rules that would apply to "large emitters,” the government's election platform noted that this regime would reduce the cost of Alberta emission credits to $20/ton (compared to $30/ton) and would be effective 1 January 2020.
Read a May 2019 report prepared by the KPMG member firm in Canada
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.