Tax & Trade Blog

As we wrote about here Canada’s carbon tax system is complicated and causing problems.

Recently, the Canada Revenue Agency (“CRA”) has been auditing and issuing assessments based on the technical requirements of the legislation.

Background

Canada’s carbon tax legislation is called the Greenhouse Gas Pollution Pricing Act – and we will refer to it as the Carbon Tax Act or “CTA”.  The CTA was enacted in 2018.  Part of it enacts a “fuel tax” (called a “Fuel Charge” for optics) which adds additional Canadian taxation points to all transactions involving combustive fossil fuels.  The Fuel Charge is levied under Part I of the CTA.

A common misconception when it comes to oil and gas trading with Canada is that, for GST/HST purposes, there will never be any obligations on foreign sellers selling on a DAP basis.* This is not true, and there can indeed by GST/HST collection and remittance obligations on US and international sellers, if certain conditions are met.

To understand why these misconceptions exist, one needs a deeper appreciation of the Canadian GST/HST legislation, found in Part IX of the Excise Tax Act(“ETA”), and also to get deep into the mindset of the Canada Revenue Agency (“CRA”), which administers the ETA and enforces GST/HST compliance.

Fresh off of its announcement of a major plastic ban (see our prior blog here), the Canadian federal government is now also moving forward with a plan to heavily regulate the plastics that do remain in the Canadian economy, by imposing a mandatory federal “plastics registry”.

The Liberal Government plan is currently in the consultation stage, which means that producers, importers, distributors and retailers have until October 7, 2022 to provide input.

Carbon pricing in Canada can be confusing for both new entrants to the market and established players. This comes from Canada’s patchwork system of rules which vary across the country. Adding to the complexity is the fact that the federal Greenhouse Gas Pollution Pricing Act (“GGPPA”) only applies (as a “backstop”) where provincial/territorial legislation is not strict enough (in the opinion of the federal government)!

US businesses with Canadian carbon activities need to be aware of multiple different rules – federal (under the GGPPA, which applies in the so-called “listed provinces” outlined below) and provincial/territorial (applicable to the particular province in which they are operating).

Figuring out where one has to register is just the first step!