Carbon Tax Screw-Up

April 28, 2008 (afternoon)

Carbon Tax Introduced to Divided Greens

On the afternoon of April 28th, Finance Minister Carole Taylor finally introduced her key budget measure, Bill 37 (2008), Carbon Tax Act. Kevin Falcon, the minister who drove the deregulation initiative in Campbell's first term, must have recanted all he advocated in 2001. Regulatory requirements hit the Richter Scale with obligations for fuel vendors to register as collectors of the tax.

Section 12 of the Act states: "A person who, within British Columbia, burns a combustible to produce energy or heat must pay to the government, at the prescribed time and in the prescribed manner, tax on the combustible at the rate for that type of combustible set out in the column of the Table in Schedule 2 that applies for the period of time in which the combustible is burned." Schedule 2 lists only three "combustibles": peat, shredded tires and whole tires. Since the Act defines combustibles as items or materials set out in Schedule 2, it appears that the burning of wood it not captured by the Act, but don't be surprised if the Campbell government soon adds wood burning fireplaces to its tax regime.

Remember that the Green Party called for a five times higher initial price for carbon emissions - $50 a ton rather than $10. Green Party Leader Jane Sterk also said that there is nothing in Campbell's carbon tax that will achieve the goal of reducing greenhouse gases. Nevertheless, more than 16 environmental organizations were on hand to cheer for the Campbell government's carbon tax, and the David Suzuki Foundation was quick to put out a news release to make sure everyone knew. Perhaps Sterk is offside with her supporters.

The market is driving prices up far faster than the carbon tax will in the short-run. It will be after the 2009 election before the carbon tax really begins to be felt on those for whom it is far from revenue neutral.

April 28, 2008 (morning)

Carbon Tax Screw-Up

You've got to hand it to Premier Campbell and his cabinet; it's never good enough to improve, they've got to be the best in the world. Hence on April 28th, we find ourselves 9 weeks away from the implementation of one of "the broadest and most comprehensive taxes of its kind in the world" without the necessary legislation. That puts the carbon tax in the same camp as Bill 18, the Campbell government's cap and trade legislation. BC is part of the Western Climate Initiative, but it is the only jurisdiction to enact legislation before the partners to the agreement decide on the rules for cap and trade.

The July 1st implementation date for a carbon tax poses challenges beyond not having the necessary legislation in place. One of the principles of good public finance is ease of administration. Just how is the Campbell government going to collect $10 per ton for carbon emissions on "a wide range of fossil fuels - including gasoline, diesel, coal, propane, natural gas, and home heating fuel"?

If the government is going to stand the chance of a snowball in a hotspot of implementing its new taxes without a massive screw-up, it must have started consultations with the entities that will have to modify their computer and accounting systems so as to enable them to collect the tax. The Campbell government needs to share with the public what it should have shared with Terasen Gas and dozens of other suppliers about the collection of the tax. Of course, there is always the worst possible scenario, that the rules for implementing and collecting the carbon tax have not been shared with any of those charged with collecting the "broadest and most comprehensive taxes of its kind in the world" starting July 1st!

The Ministry of Finance estimated that the new carbon tax will raise $338 million in 2008-2009, rising to $880 million in 2010-2011. the Campbell government has committed itself to "revenue neutral offsets" so it cannot afford to back-off from implementing the new revenue grab. What may be revenue neutral in the aggregate is nothing close to it for individual consumers, and certainly not for regions. Vancouver Sun columnist Vaughn Palmer recently wrote about the break with parliamentary tradition; budget bills are normally introduced on the same day as the budget. The major tax bill for the current session is more than two months late; many would describe that as evidence of gross incompetence. With nine weeks to go before implementation, and gasoline already at over $1.30 per litre, British Columbians deserve to have more information on how Campbell's new tax will work.