WELLINGTON COUNTY – Less than 24 hours after the Canadian Federation of Independent Business (CFIB) announced the federal government’s plan to tax the carbon tax rebate for small businesses on Nov. 12, finance minister Chrystia Freeland took to X (formerly Twitter) to announce the government’s reversal of the decision.
“It’s a good outcome,” said CFIB president and CEO Dan Kelly. “They don’t always happen that way.”
In 2019 the federal government announced small businesses would receive 10 per cent of the total carbon tax revenue as rebates. However, after waiting nearly five years, small businesses had not received rebates and were unsure if they would.
Moving into this year, as part of the 2024 federal budget announced in April, the federal government stated it would be returning over $2.5 billion by the end of this calendar year to small and medium businesses in provinces where the federal fuel charge applies.
“By the end of this year, a portion of fuel charge proceeds from 2019-20 through 2023-24 will be returned to approximately 600,000 Canadian controlled private corporations with one to 499 employees,” stated an October press release from the Department of Finance Canada.
In a press release, released by CFIB before the government’s reversal, Kelly branded the decision as “deeply offensive to small firms” and claimed that only after a significant CFIB lobbying campaign supported by thousands of small business owners and provincial premiers, did the government agree to return the over $2.5 billion that had accumulated in small business rebates in the first place.
According to Kelly, the Canadian Revenue Agency told CFIB in writing that it understood the carbon tax rebate would be tax-free just as the individual rebates, which are exempt from income taxes.
“This made sense to us,” said Kelly. “But after we asked the Department of Finance for final confirmation of this information, they told us the small business rebate would be taxable as it is considered government assistance.”
CFIB stated in its press release that it had sent an open letter to Freeland urging the government to abandon its decision to tax the rebates.
Less than 24 hours later, Freeland posted a statement on X stating that the rebates would indeed be tax-free.
“The Canadian Carbon Rebate is delivering $2.5 billion directly to small businesses,” said Freeland. “This rebate will be tax-free.”
Small businesses that qualify can expect their carbon tax rebates by Dec. 16 if registered for direct deposit with the CRA, or by Dec. 31 if receiving payment by cheque.
To check eligibility or to calculate how much to expect, visit canada.ca/en/revenue-agency/services/tax/businesses.
