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Revenue Neutral Climate Action Initiatives

Carbon Tax

The Government intends to introduce legislation that, if passed, will impose, effective July 1, 2008, a broadly based revenue neutral tax on the purchase or use in BC of fossil fuels such as gasoline, diesel fuel, natural gas, home heating fuel, propane and coal.

The initial rate of tax for each fuel will be based on $10 per tonne of carbon dioxide equivalent (CO2e) emissions released from the burning of the fuel. CO2e is a measure of the total greenhouse effect created from all greenhouse gases (GHGs) produced from the combustion of fossil fuels, with the non-CO2 GHG emissions adjusted to a CO2e basis. The tax rates will increase over the next four years based on CO2e emissions of:

  • $15 per tonne on July 1, 2009;
  • $20 per tonne on July 1, 2010;
  • $25 per tonne on July 1, 2011; and
  • $30 per tonne on July 1, 2012.

As of July 1, 2008, the tax rates for major fuel types are:

• gasoline   2.41 cents per litre
• diesel fuel   2.76 cents per litre
• natural gas   49.88 cents per gigajoule
• heating fuel oil   2.76 cents per litre
• Canadian bituminous coal   $20.79 per tonne
• sub-bituminous coal   $17.72 per tonne

The carbon tax will be revenue neutral. The legislation will require that a plan be tabled in the legislature each year showing how all of the revenue raised from the carbon tax will be used to reduce other provincial taxes.

The following personal and corporate income tax reductions will return carbon tax revenue to taxpayers in 2008/09.

Income Tax Act

Low Income Climate Action Tax Credit Introduced

To help low-income individuals and families with the carbon taxes they pay and as part of the government’s commitment that the carbon tax be revenue neutral, a new ongoing low income climate action tax credit is introduced effective July 2008.

The maximum annual tax credit is calculated as $100 per adult plus $30 per child with single parent families receiving the adult amount for the first child in the family. The maximum annual credit is reduced by two per cent of net family income (recipient’s and spouse’s net incomes from the prior year) in excess of a threshold of $30,000 for single individuals and $35,000 for families. For example, for the period from July 2008 to June 2009, a single individual with net income of $30,000 or less will receive $100; a couple or a single parent with one child and $35,000 or less in family net income will receive $200; and a couple with two children and net family income of $35,000 or less will receive $260.

The reduction thresholds will be indexed to provincial inflation starting in 2009. The maximum tax credit amounts for 2009 will increase by 5 per cent each to $105 per adult and $31.50 per child.

The credit will be paid together with the federal Goods and Services Tax Credit payment which is made each January, April, July and October. As such, eligible recipients will receive one-quarter of the annual tax credit each calendar quarter. The first payments under this program will be made in October 2008 and will include the amount for July 2008.

Personal Income Tax Rates Reduced

As part of the government’s commitment that the carbon tax be revenue neutral, the bottom two provincial personal income tax rates are reduced effective for the 2008, 2009 and subsequent tax years. The rate reductions will result in a tax cut for all taxpayers of about 2 per cent in 2008 and 5 per cent in 2009 on income in the first two tax brackets, up to about $70,000 in taxable income.

Table 3.2 shows the provincial personal income tax rates prior to the rate cuts and the rates for 2008, 2009 and subsequent tax years.

Table 3.2.

Table 3.3 shows the impact of the tax rate changes to British Columbia personal income taxes payable by a single individual with wage income and claiming basic credits only.

Table 3.3.

The tax rate reductions build on the personal income tax cuts the government has introduced since 2001. These tax cuts include the 25 per cent tax cut in 2001, the BC Tax Reduction in 2005, the 10 per cent tax cut in 2007 and the reductions announced in this year’s budget. Table 3.4 shows the impact of these changes by comparing BC taxes payable using rates in effect prior to the changes in 2001 and after the rates are cut for 2009.

Table 3.4.

General Corporate Income Tax Rate Reduced

As part of the government’s commitment that the carbon tax be revenue neutral, the provincial general corporate income tax rate is reduced from 12 per cent to 11 per cent effective July 1, 2008. Since 2001, the rate has been reduced from 16.5 per cent to 11 per cent, a reduction of one-third.

Small Business Corporate Income Tax Rate Reduced

As part of the government’s commitment that the carbon tax be revenue neutral, the small business corporate income tax rate is reduced to 3.5 per cent from 4.5 per cent effective July 1, 2008, a reduction of 22 per cent. In recognition of the importance of small business to the economy, the small business tax rate threshold has also been doubled from $200,000 to $400,000 since 2001.

One-time Climate Action Dividend Payment

In addition to the tax cuts outlined above to make the carbon tax revenue neutral, the province will make an additional one-time climate action dividend payment of $100 to each British Columbian who was resident in the province on December 31, 2007. This additional payment, which is funded from the 2007/08 surplus, is intended to help British Columbians make changes to reduce their use of fossil fuels.

Individuals who have attained the age of 18 years, meet the residency requirement and are not incarcerated for a period of 90 days that includes January 1, 2008, and who have filed either a 2006 or 2007 personal income tax return for British Columbia, will receive the payment automatically. In addition to their $100 payment, parents will receive $100 for each child that is under 18 years of age at the end of 2007.

Most British Columbians will receive their one-time payment in June 2008. Payments will continue to be made as eligible British Columbians file their income tax returns. To receive a payment, individuals must file an income tax return or notify the province of their eligibility no later than August 31, 2010.

Outreach programs will be established to ensure that all eligible British Columbians receive their payments.

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