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Questions remain about federal carbon tax program

Carbon taxes are being considered and/or implemented across Canada, both provincially and at the federal level. The Trudeau government is rolling out its tax in April. This will have widespread effects on the trucking industry.

Here is what we know about the federal carbon tax:

  • It comes into effect in April, at the rate of $0.0537/litre for diesel fuel, and with a scheduled increase until it reaches $0.1341/litre in 2020
  • It works in a similar mechanism as IFTA (International Fuel Tax Agreement) reporting, that charges tax based on fuel used within a jurisdiction
  • The federal government says 90 per cent of the revenue collected will be returned to the residences in the provinces through an annual rebate03_Carbon_Tax

What does this mean for the trucking industry? The Federal Carbon Tax Backstop being implemented by the federal government has a few shortcomings:

  • Potential double tax. We are concerned that carriers could be taxed in multiple provinces for different carbon tax programs.
  • No money returned to the trucking industry to make investments in technologies that reduce emissions. No money coming back to trucking means less incentive for trucking to invest expensive equipment that reduces fuel burn. In fact, the extra money being returned to residents might only help them to pay for the increased cost of day-to-day consumer products such as fruit and vegetables. These commodities are generally priced very tightly to the cost of transportation and as the cost of fuel increases so does transportation cost, and typically, so do consumer goods.
  • Lack of clarity of compliance enforcement. Because the federal carbon tax program is managed by Canada Revenue Agency, there is no clear answer (that we are aware of) in terms of how CRA will be able to enforce this program for U.S. carriers going to the affected provinces (Saskatchewan, Manitoba, Ontario and New Brunswick). In other words, it can potentially put the Canadian trucking companies at a disadvantage when competing with the U.S. competitors.
  • Extra administration burden. It means the carriers will be required to file the federal carbon tax, in addition to the current IFTA tax, though both of them are using the same mechanism. It will add extra administration burden to the carriers and to the federal government to create another IFTA-like program.

As a whole, the trucking industry supports greenhouse-gas-emission reduction and protecting the environment. Newer models of trucks are featuring technologies that significantly improve fuel efficiency and reduce GHG emission even though it comes with a much higher price tag.

The federal carbon tax program is claimed to return 90 per cent of the revenue to the residents of the affected provinces, however, we are still not aware of any logical plan to directly incentivize trucking companies to continue investing in technologies and equipment that will contribute to a healthier environment for generations to come.

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