The Canada Revenue Agency will be taxing the small business carbon rebates, despite the Liberals previously backing off the measure after facing serious backlash.
The Canadian Federation of Independent Business announced it had learned of the incoming taxation on Monday.
“The CRA has confirmed to CFIB in writing that the Canada Carbon Rebate for Small Businesses is considered ‘assistance received by the taxpayer from a government in the taxation year in which the assistance is received. As such, it is subject to income tax. This announcement (to make it tax-free) and the FES were not accompanied by the proposed legislative amendments,’” said the federation.
Carbon tax rebates going to Canadian families remain tax-free.
Less than one day after originally announcing that the carbon tax rebate for small businesses would be taxed, the Liberals backtracked on their position and removed the tax last November.
Conservative MP Brad Vis slammed the Liberals for flip-flopping on their position.
“Canadians can’t trust a word the Liberals say,” said Vis. “Only the Liberals would think this is the right way to help small businesses in Canada … We cannot handle any more of this anti-business government.”
A November statement from the Department of Finance said, “The Canada Carbon Rebate for Small Businesses is a tax-free payment.”
But apparently it isn’t.
The $2.5 billion in rebates have already faced five years of delays. Between 2019 and 2024, only 0.17 per cent of the rebates were delivered, according to the CFIB.
However, they were finally delivered recently. In December, 600,000 small businesses received rebates of around $4,000 each.
“After waiting five years for government to get around to rebating a share of carbon tax revenue to small businesses, we now learn that Ottawa will tax the tax rebate,” said CFIB President Dan Kelly.
The federation said because the Canada Revenue Agency declared the rebates taxable, only new legislation passed through Parliament can override the decision.
Canada’s Governor General Mary Simon granted Prime Minister Justin Trudeau’s request to prorogue Parliament while the Liberal Party of Canada selects its new leader, and the country’s new prime minister, a race set to conclude on Mar. 9.
“This, on top of the need to prepare for the U.S. tariff threat, is another reason to resume Parliament immediately,” said Kelly.
While President Donald Trump’s proposed 25-per-cent tariffs have been paused for a month, the threat is still outstanding.
On top of urging Parliament to be recalled, the CFIB called for the Liberals to cancel the incoming 19-per-cent carbon tax increase scheduled for Apr. 1, 2025.
The two main Liberal candidates, Mark Carney and Chrystia Freeland, have both pledged to oppose the carbon tax. Conservative Leader Pierre Poilievre opposes the carbon tax. NDP Leader Jagmeet Singh has long abandoned the carbon tax.
Despite no leaders supporting the carbon tax, it remains — along with its incoming increase.
However, polling indicates that the majority of Canadians don’t believe the new Liberal leader will eliminate the consumer carbon tax, irrespective of their claims.
The federation said that as long as the carbon tax remains in place, small businesses should be returned nine per cent of total revenue and unincorporated businesses should enjoy similar relief.
