VANCOUVER—British Columbia’s Finance Ministry is disputing claims from a Fraser Institute report that says the province’s carbon tax is no longer revenue neutral.
The study released Feb. 16 says the B.C. government no longer cuts other taxes to roughly equal new revenues from the carbon tax.
Without that offset, the study says the province is collecting millions of dollars in additional revenue from taxpayers, which study co-author Charles Lammam says violates the government’s commitment to keep the tax revenue neutral.
The study says the tax was revenue neutral up until 2013, when the government stopped providing new cuts to offset the additional revenue it was collecting from the carbon tax.
A statement from the Finance Ministry says tax cuts exceeded revenue from the carbon tax by an estimated $500 million last year.
The ministry says small and targeted tax measures that have been implemented since 2012—the last time the carbon tax increased—have helped keep it revenue neutral.
The government says it has returned more than $1.6 billion in tax cuts to employers, individuals and families since the carbon tax was established in 2008.
“We look at the entire tax system every year as part of the budget process, and it’s reasonable that deciding to continue providing a tax cut is as legitimate a tax measure to include as an entirely new tax reduction,” the ministry says.
It says some tax credits have expiry dates and when the ministry decides to continue them, there is a cost to government.
The Fraser Institute takes issue with the government’s use of pre-existing tax credits in its calculations.
It says once pre-existing tax reductions are excluded, B.C. taxpayers paid $226 million in increased taxes in 2013-14 and $151 million in increased taxes in 2014-15.
The study says the B.C. tax is often praised as a model to follow because of claims it is revenue neutral.
“The B.C. government has effectively raised taxes by hundreds of millions of dollars without British Columbians even knowing about it,” says Lammam in a news release.
Finance Minister Mike de Jong said he doesn’t understand or agree with the study’s calculations and it contradicts the criticism the government normally gets on the tax.
“Most of the criticism we’ve received lately has been for the fact that our tax reductions far exceed the revenues we receive from the carbon tax,” he said Thursday.
De Jong said the ministry has been discussing possible tax reductions and after Tuesday’s budget, the Fraser Institute’s findings “will be a moot point.”