Small businesses will still be taxed on carbon rebate while Parliament is suspended

Government promised to change policy last year
The federal government confirmed that small businesses will have to pay tax on their carbon rebate, despite government promises otherwise, because Parliament can’t currently pass legislation to make the payment exempt from income taxes.
But if legislation eventually passes to do that, the government says businesses can apply for a rebate for the taxes paid on their rebate.
Dan Kelly, president and CEO of the Canadian Federation of Independent Business, says the situation is a “mess.” Small- and medium-sized businesses without a large carbon footprint pay the carbon price on fuel inputs the same way an individual consumer does, including buying gas for fleet vehicles or heating and powering their offices.
Initially the government was going to set aside seven per cent of revenues collected from the consumer carbon levy to provide funding to smaller businesses to reduce their energy use. But those programs never worked, and by 2024 more than $2.5 billion in carbon price revenue was owed to those businesses from five years of paying the levy.
In the 2024 budget, then-finance minister Chrystia Freeland said the money would be paid to 600,000 small and medium businesses, and those payments were finally paid in December.
In November, Freeland declared that those rebates would be “tax free.”
But that never happened amid the filibuster that stalled all business in the House of Commons throughout the fall, and now the Liberals’ decision to prorogue Parliament until the end of March. Marie-France Faucher, a spokesperson for the Finance Department, said in a statement the government is committed to making the rebate tax free. Until then, small businesses will continue paying taxes on carbon rebates.
“A legislative amendment to implement this change will be tabled at the earliest opportunity,” Faucher said in an email.
Source: cbc.ca/news/