The provincial government's new carbon tax will shift a greater portion of the tax burden onto B.C.'s businesses, despite cuts to corporate taxes announced Tuesday by Finance Minister Carole Taylor.
Taylor said North America's first carbon levy will tax all fossil fuel used in the province and will consequently raise the price of everything from gasoline, diesel and jet fuel to natural gas, propane and coal.
The tax will raise an estimated $338 million in 2008, $631 million in 2009 and $880 million in 2010.
Gasoline prices are expected to rise by $0.0241 per litre starting July 1. That increase is projected to jump to $0.0482 in 2010 and $0.0724 in 2012.
Taylor noted, however, that increases in revenue from the carbon tax will be offset by decreases in corporate and personal income taxes.
She announced 1% cuts to corporate and small business income tax rates, effective July 1. They'll be in addition to a 2% personal income tax cut for taxpayers in the lowest two provincial income tax brackets. Tax rates are expected to drop further in 2009 and 2010 to offset the increase in carbon tax revenue.
Businesses, however, will still shoulder two-thirds of the carbon tax cost, according to the province's three-year projections.
Fuel-dependent enterprises like those in transportation, tourism and industry will be hardest hit by the new tax, which will have a significant impact on B.C.'s competitive edge. For example, the carbon tax on aviation fuel will be added to the cost of all flights within B.C., but not those with destinations outside the province.
Also, fuel used by ships travelling within B.C. waters will be subject to the tax, but cruise ships and cargo vessels leaving Vancouver for international destinations won't.
Taylor argued that the negative impact to the province's economy will only be 0.1% of annual GDP.