The Canadian Federation of Independent Business (CFIB) has expressed outrage over news that the government intends to tax long-overdue carbon tax rebates for small businesses, expected to be issued in December. The plan has triggered strong reactions from CFIB leadership and members alike, who argue it contradicts the intended support the rebate was supposed to provide.
Dan Kelly
“This is deeply offensive to small firms and, frankly, a ridiculous idea,” said CFIB President Dan Kelly. “The government is now planning to tax a tax rebate – it’s like charging income tax on someone’s tax refund. Taxing the carbon tax rebate also dismantles any pretense that the carbon tax is revenue-neutral. The government will collect hundreds of millions in corporate tax revenue on these rebates.”
The CFIB represents 97,000 small and medium-sized businesses across Canada.
A Shift in Policy: From Non-Taxable to Taxable
The CFIB had previously received assurances from the Canada Revenue Agency (CRA) that the small business carbon tax rebate would be non-taxable, similar to the Canada Carbon Rebate for individuals. This understanding was upended when the Department of Finance recently confirmed that the small business rebate would indeed be considered taxable government assistance.
“This made sense to us initially,” Kelly continued. “But after seeking confirmation from the Department of Finance, we were told the small business rebate would be taxed as government assistance. Rebating a portion of the carbon taxes that small businesses have paid hardly qualifies as ‘government assistance’ in our view.”
Five-Year Delay, Reduced Rebates, and Rising Carbon Costs
The CFIB has long criticized the carbon tax system, noting that small businesses have faced significant unfairness under the program. Initially promised 10% of total carbon tax revenue in rebates in 2019, small firms have been waiting for five years to receive the accumulated $2.5 billion. Only after intense CFIB lobbying efforts, a petition from thousands of small business owners, and support from various political leaders, did the government agree to distribute the overdue funds.
Adding insult to injury, small businesses face a further reduction in future rebates, which will decrease from 9% to 5% of total carbon tax revenue in 2025. At the same time, the carbon tax rate itself is set to increase on April 1, 2025. CFIB has sent an open letter to Finance Minister Chrystia Freeland urging her to abandon this approach and reconsider the impact on small businesses.
Mounting Small Business Opposition to the Carbon Tax
“Given these continual setbacks, it’s not surprising why 83% of small business owners now oppose the carbon tax,” Kelly said. “The government’s pattern of delaying, taxing, and reducing promised rebates to small businesses only reinforces why we need to scrap the carbon tax entirely.”
Tools for Business Owners and Continued Advocacy
To help small business owners understand the rebates they might be eligible for, CFIB offers an online calculator and an open petition to urge the government to eliminate the tax. Kelly concluded, “It’s critical for small businesses to know what’s happening and for their voices to be heard. CFIB is committed to fighting for fair policy that supports rather than hinders small businesses across Canada.”
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list. He was also named by RETHINK to its global list of Top Retail Experts 2024.
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