Saskatchewan has agreed to secure half of the funds the feds say it owes for refusing to pay the federal carbon tax, though the legal battle isn’t over.
The province has accepted a security agreement with the Canadian Revenue Agency, committing to hold half of the funds the agency claims it owes until the dispute is resolved.
The province said Tuesday it would hold 50% of the roughly $56 million the CRA says it owes under the federal carbon tax scheme as a letter of credit.
The agreement was struck a week after Saskatchewan was granted an injunction to block the federal government from taking from its coffers. Saskatchewan earlier this year stopped collecting the federal carbon tax, prompting a standoff between the two levels of government culminating in Canada Revenue Agency taking the province to court earlier this month.
“Saskatchewan has offered to establish a letter of credit, which is common practice for companies and other large entities and explicitly provided for under the federal carbon tax legislation. It will remain in place until our dispute is determined by the Tax Court of Canada,” Saskatchewan Attorney General Bronwyn Eyre said in a statement.
The letter will be held until the dispute within the federal tax court is resolved. This will ensure that if the federal tax court rules against the province, it will have at least half of the funds owed set aside and ready to be paid.
“While an outstanding amount remains to be paid, this agreement ensures that Saskatchewan complies with the law on the funds they owe the CRA,” Marie-Claude Bibeau, the federal national revenue minister, said in a statement posted on X.
CRA told True North this is a “common practice” in such matters.
“It’s common practice under the acts we administer for the CRA to consider security on a case-by-case situation when amounts assessed are being contested yet payable, such as large corporations for 50% of the debt,” a representative from the CRA told True North in an email.
The agency said that the Greenhouse Gas Pollution Pricing Act, the law mandating the carbon tax, permits the national revenue minister to collect at “any time and irrespective of any dispute” up to 50% of the money the agency has accessed the province owes.
Eyre shared the news of the agreement as a victory for the province.
“We stopped them. The Government of Saskatchewan has been successful in preventing the federal government from its unconstitutional attempt to grab money out of Saskatchewan’s bank account,” Eyre said. “The province’s bank account and general revenue fund are safe and sound, and all monies remain there, thanks to the court’s early intervention.”
She said as early as June 26, Saskatchewan offered the CRA alternatives to garnishing funds out of the province’s Consolidated Revenue Fund, the bank account through which the province pays public funds to the federal government.
However, she said the agency ignored those alternatives and unconstitutionally attempted to take the funds themselves.
The battle between the province and the feds began when Premier Scott Moe announced that his province would not charge its citizens for the carbon tax on natural gas. This was in response to the Liberal government giving Atlantic Canada an exemption on home heating oil.
On Tuesday, at a meeting between the premiers and Prime Minister Justin Trudeau, Moe told reporters that he would rather see an end to the carbon tax than this agreement and legal challenges with the feds.
“(The carbon tax) is largely what is pushing up inflation in our nation and in our province,” he said.
Moe pointed to Saskatchewan’s and Manitoba’s success in having the lowest cost of living in the country, which he attributes to Manitoba’s removal of the fuel tax on products and Saskatchewan’s removal of the carbon tax on home heating.
“That is really a part of pushing down our consumer price index or our inflationary rate in Saskatchewan to a level that is about half of the national level and one of the lowest in Canada,” he said.
The federal tax court date for resolving the dispute has yet to be announced.