Should we have a carbon tax or end carbon deductions?

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Around the world, it’s a commonly accepted principle that businesses can deduct fuel expenses as part of their everyday cost of doing business.

Governments around the world are also in a scramble to make every person pay directly or indirectly for carbon use.

So, the simple question I have is why don’t we just put an end to the deduction of fuel expenses from tax returns?  This would tax those that use it as opposed to penalizing everyone else.  It would also force the world of manufacturers, delivery services and other consumers of carbon to reconsider their choices and demand better options, especially if we choose instead to subsidy ‘green’ options.

The Details …

In Canada, businesses can claim roughly 30-40% of all expenses related to vehicle ownership and usage, including gas, insurance, maintenance, tires, parking and so on.

And yet, we rarely see politicians jumping on this subsidy to carbon eaters.


It’s nearly impossible to find anything in the public domain that assesses the impact of carbon-based deductions and those that continue to indirectly subsidize carbon use.

So, I’m going to guess.  There are roughly 1.17 employer businesses in Canada (Dec 2015), with about 98% of them being small businesses (less than 100 people).  The vast majority within the small business group have less than 4 people on their payroll.

Going from my own personal experience, auto expenses amounted to roughly $3,500 per year in the last few years that I made these deductions.  Multiply this by the 1.14 million small businesses and you get roughly $4 billion in cost.

And even though large companies account for such a tiny fraction of the number of companies, they still account for millions of employees that either have gas deduction or allowable mileage as a business expense.

With this in mind, I’m going to guess that the cost of carbon deduction is roughly $20 billion per year in foregone revenue from the federal and provincial coffers.

This pairs well with the IMF estimate for Canada that pegs carbon subsidies at about $34 billion per year.

The target carbon tax that’s been implemented in Ontario is expected to become the provincial government’s largest new tax generator, resulting in roughly $1.9 billion in new cash for Kathleen Wynne.

What we’ve done is transferred the cost of carbon use to everyone instead of the actual users.

This must end.

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