International Best Practices: Estimating tax subsidies for fossil fuels in Canada
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Tax expenditures and other types of fossil fuel subsidies must be measured and reported transparently by Canadian governments.
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Of the 128 revenue foregone policies we identified in the fossil fuel sector in Canada, only 50% were quantifiable.
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Quantifiable revenue foregone policies in the fossil fuel sector in Canada account for around CAD 3.2 billion in fossil fuel subsidies.
Canadian governments provide financial support for fossil fuels through a variety of measures, including direct transfers to fossil fuel producers. Much of this support is provided through the tax system. Tax expenditures reduce government revenue and create incentives for the production and consumption of fossil fuels. A clear understanding of the extent of tax subsidies is necessary to assess their impacts on government budgets—particularly important in the context of the COVID-19 economic recovery—as well as on air pollution and climate change. But the transparency of the cost of Canada’s tax subsidies for fossil fuels is poor. We recommend that all tax expenditures and other types of foregone revenue be measured and reported in line with international guidelines and best practices.
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