Remission Order of Federal Administrative Fees Paid or Payable by the Yukon and the Northwest Territories: SI/2019-51

Canada Gazette, Part II, Volume 153, Number 14

Registration

SI/2019-51 July 10, 2019

FINANCIAL ADMINISTRATION ACT

Remission Order of Federal Administrative Fees Paid or Payable by the Yukon and the Northwest Territories

P.C. 2019-956 June 22, 2019

Her Excellency the Governor General in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of Finance and the Treasury Board, pursuant to subsection 23(2.1) ^{footnote a} of the Financial Administration Act ^{footnote b}, remits the following amounts:

• (a) to the Government of Yukon, the administrative fees paid or to be paid, under the Tax Collection Agreement between the Government of Canada and the Government of Yukon, that came into force on January 1, 2004, for the administration, by the Government of Canada, of the personal carbon price rebate provided for under section 7 of the Income Tax Act, chapter 118 of the Revised Statues of Yukon, 2002, and of the business carbon price rebate provided for under section 16 of that Act, up to an amount of $3,343,998; and
• (b) to the Government of the Northwest Territories, the administrative fees paid or to be paid, under the Tax Collection Agreement between the Government of Canada and the Government of the Northwest Territories, that came into force on January 1, 2004, for the administration, by the Government of Canada, of the cost of living offset, up to an amount of $1,598,690, provided that provisions substantially consistent with the proposed section 3.5, as it is set out in section 4 of Bill 43, introduced during the 3rd session of the 18th Legislative Assembly of the Northwest Territories and entitled An Act to Amend the Income Tax Act, come into force.

EXPLANATORY NOTE

(This note is not part of the Order.)

Proposal

This Remission Order seeks Governor in Council approval, on the recommendation of the Treasury Board, pursuant to subsection 23(2.1) of the Financial Administration Act, to prospectively remit federal administrative fees paid or to be paid by Yukon and the Northwest Territories (NWT) for set-up costs related to the rebate programs put in place by the territories to return the proceeds of carbon pollution pricing to their residents and businesses. These costs will amount to approximately $3.3 million for Yukon and approximately $1.6 million for the NWT over the fiscal years 2019–2020 to 2021–2022.

Objective

The Order will grant relief for fees paid or to be paid by Yukon (up to $3,343,998) and the NWT (up to $1,598,690) under their respective Tax Collection Agreements for the administration of their pollution pricing rebates by the Canada Revenue Agency (CRA). The objective of the Order is to uphold Canada’s commitments to the two territories under the Pan-Canadian Framework (PCF) on Clean Growth and Climate Change. Under the PCF, Canada committed to find solutions to pollution pricing that recognize the unique circumstances of the territories, including high costs of living and challenges with food security and emerging economies.

Background

Tax collection agreements (TCAs)

TCAs are bilateral agreements between the federal and provincial/territorial governments on the administration of provincial/territorial personal and corporate income tax systems. Under the TCAs, the federal government administers and collects personal income tax for all provinces and territories except Quebec, and corporate income tax for all provinces and territories except Alberta and Quebec.

The federal government administers provincial and territorial income tax systems under the TCAs. To support income tax harmonization in Canada, TCAs require that jurisdictions assume the cost for the CRA to administer certain tax programs that are different in design from federal programs.

Pan-Canadian Framework on Clean Growth and Climate Change (PCF)

In 2016, the federal government, along with most provinces and territories, agreed to the terms of the PCF, an action plan to reduce greenhouse gas emissions, grow the economy, and build resilience to a changing climate. The Framework stated that all jurisdictions would implement pollution pricing by 2018. The Framework also provided that a federal backstop would be implemented in jurisdictions that did not meet the Canada-wide standard for pollution pricing, and that Canada would work with the territories to find solutions to pollution pricing that recognize their unique circumstances, including high costs of living and challenges with food security and emerging economies.

Yukon has voluntarily adopted the federal carbon pollution pricing system, whereas the NWT has opted for its own carbon pollution pricing system that will meet the Canada-wide standard for pollution pricing. Both of these territories have developed their own carbon revenue recycling initiatives in the form of tax rebate programs. Pollution pricing in the territories and the related territorial tax rebate programs are set to come into effect on July 1, 2019, in Yukon and September 1, 2019, in the NWT, subject to the passage of the related territorial legislation.

Administrative fees

Pursuant to the terms of their TCAs, Yukon and the NWT have requested federal administration of their tax rebate programs to return the proceeds of pollution pricing to their residents. However, as the design of these territorial tax rebate programs will differ from the federal pollution pricing rebate program that applies in backstop provinces (i.e. those provinces that either do not voluntarily adopt the federal carbon pollution pricing system or do not develop their own program that meets the Canada-wide standard), the CRA would be expected, pursuant to the TCAs, to charge fees associated with the administration of these territorial rebates.

The fees in question would represent a significant and unanticipated incremental cost for Yukon and the NWT, creating undue hardship by more than doubling the annual fees charged to the two territories for the administration of their tax programs under the TCAs. In sum, these fees would be unduly prohibitive to the implementation of pollution pricing in Yukon and the NWT. Failing to provide a solution for these prohibitive fees would be contrary to Canada’s commitments under the PCF. Relief from these administrative fees is therefore necessary to respect Canada’s commitments to the territories in the implementation of their carbon pollution pricing systems and carbon revenue recycling initiatives, and to ensure the just and reasonable administration of territorial income tax systems.

Financial Administration Act

Subsection 23(2.1) of the Financial Administration Act authorizes the Governor in Council, on the recommendation of the Treasury Board, to remit a debt where the Governor in Council considers that the collection of the debt is unreasonable or unjust or that it is otherwise in the public interest to remit the debt.

Implications

This Order would grant a remission to Yukon and the NWT for fees charged pursuant to the terms of their respective TCAs for the initial development of rebate programs to return the proceeds of pollution pricing to their residents. The two territories will continue to pay the ongoing administrative fees for these rebate programs.

This Order would be granted to provide relief for the initial, unanticipated impact of the administrative fees. This Order would also ensure clarity regarding the federal government’s position on relief for Yukon and the NWT before pollution pricing comes into effect in the territories.

Financial implications

This Order would not require incremental funds from the fiscal framework. To cover the initial development costs of these rebates in lieu of the remitted fees, the Government of Canada will reallocate up to $4.9 million from the funds earmarked in the 2018 Fall Economic Statement for the CRA to administer payments under the federal pollution pricing rebate program from 2018–2019 to 2021–2022.

Gender-based analysis plus implications

A gender-based analysis plus (GBA+) was conducted in the early stages of developing this proposal. This proposal is not expected to have differential impacts on the basis of gender. However, to the extent that the proposal would reduce the tax burden on residents who may otherwise be taxed to fund the administration of the rebate programs, the proposal would specifically benefit residents of the Yukon and the NWT, who face higher costs of living and challenges with food security. This would support the Government of Canada’s commitment to poverty reduction objectives in remote northern and Indigenous communities.

Consultation

This proposal was developed in consultation with the CRA, the Treasury Board of Canada Secretariat, and the Governments of Yukon and the NWT. All of the affected stakeholders support the remission of the fees in question.

Departmental contact

For inquires please contact:

Maxime Le Moullec
Economist
Federal-Provincial Taxation
Department of Finance Canada
Telephone: 613‑369‑9472
Email: maxime.lemoullec@canada.ca