Legal experts say the federal government has taken an extraordinary step in trying to take $28 million from Saskatchewan’s bank account for not paying carbon levy money, a case that is to be argued in court Friday.
Rory Gillis, an assistant professor at Western University specializing in tax law and federalism, said it’s the first time he’s ever seen Ottawa try to force the collection of funds from a province.
“It’s quite drastic, even in the context of individuals where one is a debtor and one is a creditor,” Gillis said this week.
“I would gather that this is a sign that the relationship between the federal government and the Saskatchewan government is very poor.”
Eric Adams, a professor at the University of Alberta with expertise in constitutional law, also said the move is unusual.
“It suggests a certain level of dysfunction between the two levels of government.”
Last week, Saskatchewan Justice Minister Bronwyn Eyre filed for an injunction to stop the Canada Revenue Agency from garnisheeing money the agency says the province owes. A judge granted a temporary stay to prevent the seizure until arguments can be heard in Federal Court in Vancouver.
Earlier this year, Saskatchewan stopped paying carbon levy money to Ottawa, after Prime Minister Justin Trudeau exempted home-heating oil users from paying.
Trudeau’s move was largely seen as helping those in Atlantic Canada, where home-heating oil is commonly used and where polls suggest the federal Liberals need to prop up popular support.
Saskatchewan is breaking federal emissions law by not remitting the levy. The province could face fines and the minister responsible for natural gas distribution could get jail time for not abiding by the rule.
Court documents show Saskatchewan’s unpaid bill is accumulating since it stopped remitting the levy to Ottawa.
The documents say the debt grew to $56 million between January and April. Of those dollars, the revenue agency attempted to get $28 million through a bank order.
The agency declined to say whether it got that money, saying it can’t discuss details of specific cases.
“The Canada Revenue Agency has a duty to consistently and fairly apply the provisions of the acts and regulations that we administer,” it said.
“We must also make sure that all persons pay the required amount of taxes, charges, duties, fees, penalties, and other amounts owing to the Crown.”
Saskatchewan disputes it owes anything.
It says that because home heating oil no longer comes under the levy, it’s unfair to charge it to Saskatchewan consumers, who use natural gas. It also argues the Constitution prevents the federal government from garnisheeing a provincial bank account.
Further, Saskatchewan says Trudeau’s exemption was politically motivated, citing a quote from federal cabinet minister Gudie Hutchings, who said the Prairie provinces should elect more Liberals if they want carveouts.
“We permit fairly substantial differences in how the federal government treats individual provinces, and Saskatchewan is kind of pushing back against that,” Gillis said.
He said he thinks the province has an uphill battle to convince the court that carbon pricing is unconstitutional. At the same time, he added that the court could be uncomfortable with allowing Ottawa to drain a provincial bank account.
“The reason we have this rule in the Constitution that the province and federal governments can’t tax each other is because we both want them to have their own separate spheres where they can operate,” Gillis said.
“We don’t want one level of government taking money from another and impairing its ability to operate.”
He said litigation could take months or years. If Saskatchewan wins, residents won’t have to pay the carbon levy. If it loses, the province will have to figure out how it’s going to come up with the money, he said.
“Does the Saskatchewan government go after consumers to retroactively collect the tax that it didn’t collect?” Gillis said.
Adams said Saskatchewan has a difficult road ahead, noting the Supreme Court of Canada ruled in 2021 that carbon pricing is constitutional.
“Residents of Saskatchewan will have to decide if the cost is worth the fight,” he said.
“They may draw that conclusion at the end of the battle when we see whether Saskatchewan has been able to extract any legal victory.”