Thank you, Mr. Speaker. Your Standing Committee on Government Operations is pleased to present its Report on the Review of the Carbon Tax Bills, Bill 42, An Act to Amend the Petroleum Products Tax Act, and Bill 43, An Act to Amend the Income Tax Act, and commends it to the House.
INTRODUCTION
The Standing Committee on Government Operations ("the committee") is pleased to report on its review of Bill 42, An Act to Amend the Petroleum Products Tax Act, and Bill 43, An Act to Amend the Income Tax Act, collectively referred to as the carbon tax bills.
The carbon tax bills, sponsored by the Government of the Northwest Territories (GNWT) Department of Finance, were given second reading in the Legislative Assembly and referred to the Standing Committee on Government Operations for review on March 8, 2019. When passed, these bills will implement a carbon tax in the Northwest Territories.
Bill 42 proposes to amend the Petroleum Products Tax Act to:
- Impose a carbon tax on petroleum products and natural gas;
- Clarify that all existing provisions in the act related to the current fuel tax are noted as such;
- Provide an exemption from the fuel tax for petroleum products delivered to or purchased by an Indian or Indian band on a reserve; or used by a designated municipal authority that is recognized by the Minister as representing a community;
- Make the necessary amendments for collection and administration of this tax in the same manner as the current fuel tax, which requires purchasers to pay the tax, and vendors and collectors to remit the tax to the GNWT;
- Allow the Minister to provide in regulations for rebates and grants;
- Increase the maximum fines and penalties which may be imposed as administrative penalties or on summary conviction; and
- Set out a process for the appeal of an assessment of tax, interest, or administrative penalties under the act.
Bill 43 proposes to amend the Income Tax Act to provide a cost-of-living offset as a mechanism for returning carbon tax revenues to Northwest Territories residents.
Bill 43 also proposes to amend the Income Tax Act to make changes in non-refundable tax credits claimed by multi-jurisdictional tax filers, including changes that restrict the Northwest Territories pension credit to NWT residents and changes that allow full pension and dividend credits to be claimed by NWT residents with business income earned outside the Northwest Territories.
This amendment, which is not related to the implementation of the carbon tax, arises out of discussions between the Department of Finance and the Canada Revenue Agency aimed at harmonizing the provincial-territorial tax treatment of pension and dividend tax credits for multi-jurisdictional tax filers. It will have the effect of denying NWT pension credits to non-residents with business income earned in the NWT and allowing full pension and dividend tax credits to NWT residents with business income earned outside the NWT.
BACKGROUND
As a signatory to the Pan-Canadian Framework on Clean Growth and Climate Change, the GNWT made a commitment to implement carbon pricing in the Northwest Territories. This tax on fuels that emit greenhouse gases (GHGs) is intended to encourage residents and businesses in the Northwest Territories to reduce fuel consumption. Along with the provinces and other territories, the GNWT was given the option by the federal government to implement its own approach to carbon pricing, provided that approach is consistent with the federal approach. For those jurisdictions choosing not to implement their own approach, Canada advised that it would impose its approach, often referred to as the "federal backstop." The GNWT opted to implement its own approach to carbon pricing, the details of which were publicly released in July 2018.
Lack of Meaningful Engagement with Committee
The GNWT communicated early and frequently with committee on this work as it progressed, including providing three presentations on the GNWT's proposed approach prior to its public release. The first of these took place in June 2017, prior to the public release of the GNWT's Discussion Paper on Implementing Pan-Canadian Carbon Pricing in the Northwest Territories. During this time period, committee wrote twice to the Finance Minister raising concerns that the GNWT's approach did not set out options for public debate; the proposed 75 percent direct rebate for large emitters was too high; there was no rebate or special measures for small businesses; and the policy objectives of the carbon tax were not clearly articulated.
According to the GNWT's plain-language summary of Bill 42, the "federal government reviewed and approved the planned approach in September 2018, and Bill 42 and Bill 43, which are needed to implement carbon pricing, were tabled in the NWT Legislative Assembly in March 2019." Committee was not advised that the federal government had "approved" the planned approach in September, which occurred while the committee was in the process of considering the legislative proposal for the carbon tax bills.
In November 2018, the committee again wrote to the government, advising that it does not support the proposal in its current form and reiterating its concerns that the 75-percent rebate for large emitters is too high and that there are no specific measures for small businesses. To this, committee added its concern that the rebates to individuals can only be claimed by filing taxes. Committee also expressed its concern that there was no indication from government as to whether or not the carbon tax legislation would mandate public reporting to enable transparency, increase public awareness of how the tax revenue is being used, and measure the impact of the carbon tax on emissions in the NWT.
While the GNWT was very forthcoming with respect to its discussions with the federal government on the GNWT's proposed approach, there was little actual engagement with committee to allow Regular Members to have input into the development of this approach. As noted, committee wrote several letters to the Minister raising committee's concerns with the proposed approach. In retrospect, committee does not feel that its input was given due consideration, nor was it made clear to committee that the information being shared was for information purposes only and that the input of Regular Members was not being sought.
Committee understands that the GNWT's proposed approach to carbon pricing in the Northwest Territories was negotiated with the federal government, leaving little room for input from Regular Members once that process had commenced. The lesson here, from the committee's perspective, is that earlier engagement of Regular Members, including engagement on the discussion of whether or not the GNWT should pursue its own approach, should have taken place.
This would have afforded Members the opportunity to debate issues such as the relative merits of differing policy approaches to reducing greenhouse gas emissions, such as a cap-and-trade system versus a carbon tax. It would have also allowed for dialogue about lessons learned from other jurisdictions such as British Columbia, which has had a carbon tax in place since 2008 and where the Minister is required to present annual plans to the provincial legislature setting out the amount of tax revenue anticipated.
Bills 42 and 43 were introduced in the Legislative Assembly, given first and second reading, and referred to committee for review on March 8, 2019.
Now, Mr. Speaker, I will turn the reading of this report over to the honourable Member for Sahtu.