Thank you, Mr. Speaker.
3. Rebates are too little and leave out too many
Committee understands that Northerners have little choice about imposing a carbon tax:
If the GNWT does not impose the tax, the federal government will.
But the made-in-the-NWT approach does give us a choice on how to spend revenues from the carbon tax. Unfortunately, the government's chosen approach leaves some households, most businesses, and all community governments, Indigenous governments, and NGOs worse off or at least treated very differently from the large emitters.
In November, Finance released a projection of carbon tax revenues and a breakdown of the associated offsets. Next year, for 2023-2024, the GNWT expects to collect about $63 million in carbon tax revenues. But only $47 million of those revenues are allocated as offsets. The remaining $16 million in revenues - about 25 percent - will go into general revenues. Committee is disappointed the government is not using more of these funds to soften the cost-of-living impacts of the tax.
At the same time, the government is not providing direct rebates to community governments, Indigenous governments, general businesses, and NGOs. The rationale provided by government that retail businesses can simply pass along the carbon tax to customers, that businesses will be eligible for GNWT energy savings programs, and that NGOs can adjust, is not accepted by committee.
Each of these sectors are facing financial pressures and will be forced to make tough decisions. One example of this especially alarmed committee: the NWT Association of Communities explained that facilities and recreational programs are among the easiest spending items to cut. Without proper rebates, local governments may be forced to reduce spending on programs that address mental health and community wellness. After the isolation experience of the COVID-19 pandemic and amid a mental health, addictions, and suicide crisis, committee finds this outcome unacceptable.
By contrast, of the $47 million in offsets that the government will provide, over half - $24
million - will go to the large emitters. That's more than the $20 million in combined COLO and COLO heating payments to households. Committee finds that the government's overall rebate approach allocates too much to large emitters, and to its own revenues, and not enough to other key impacted groups.
Yukon provides a good example of a carbon tax that is revenue neutral and benefits
more sectors of society. Its approach is formalized in the Yukon government Carbon Rebate Act. 100 percent of net carbon tax revenues are rebated to five groups:
- General businesses;
- Mining businesses;
- Residents;
- Municipal governments; and
- First Nations governments.
Each group receives at least as much in rebates as it pays in overall tax. Individuals, who pay 27 percent of all carbon taxes, receive 45 percent of all rebates. Yukon's government, which pays 12 percent of the tax, does not keep any net revenues for itself.
The Government of Yukon also provides municipal governments with 3.5 percent of its carbon rebates, more than compensating the estimated 2.6 percent share of the carbon tax that local governments pay. If the GNWT provided 3.5 percent of our rebates to community governments, they would receive $2.2 million.
As committee was finalizing this report, the Minister of Finance proposed a new community offset grant. The grant would offer all community governments revenue sharing agreements equal to 5 percent of annual net carbon tax revenue, after deducting all other carbon tax offsets, like COLO and the large emitter rebate.
While committee welcomes the proposal, committee would like to see a bigger amount and a different basis for calculation. Five percent of net revenues amounts to less than $1 million for 33 communities, which is unlikely to fully offset increased costs. The amount is also significantly less than the $2.2 million communities would receive if the department applied the Yukon's approach. The offset grant should not depend on how much money is left over after providing offsets to large emitters and households but be calculated on the basis of total rebates.
Committee wants to see better supports for all groups affected by the carbon tax. These
supports should be set out in a law, regardless of whether Bill 60 passes, with the GNWT maintaining a made-in-the-NWT tax, or Bill 60 fails with the GNWT opting into the federal backstop and receiving revenues from Canada. The Standing Committee on Government Operations therefore recommends:
Recommendation 3
That the Government of the Northwest Territories provide funding to community governments to compensate for their increased carbon tax payments. Committee specifically recommends providing an additional $2.2 million in the 2023-2024 fiscal year, with subsequent funding increasing proportionally to any future increases in carbon tax rates.
And, Mr. Speaker,
Recommendation 4
That the Government of the Northwest Territories create a law
that requires all carbon tax revenues to be rebated to households, businesses, community governments, Indigenous governments, and non-governmental organizations.
In creating this law, the government should consider how rebates to each group will
work and whether the carbon tax system should be revenue neutral. This law should
also require separate accounting and annual reporting.
Mr. Speaker, I would like to pass the reading of this report over to my colleague from Tu Nedhe-Wiilideh. Thank you.