INDUSTRY NEWS: Ontario Energy "Tax" Questioned - LawDay

The CD Howe Institute, a Toronto research organization, has released a study questioning whether the recent Order in Council, Ontario Regulation 66/10, amounts to an unconstitutional tax.

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ONTARIO ENERGY “TAX” QUESTIONED

TORONTO – The CD Howe Institute, a well known Toronto research organization, has released a study questioning whether the recent Order in Council, Ontario Regulation 66/10, amounts to an unconstitutional tax. That regulation directed the Ontario Energy Board to assess a special levy on the Independent Electricity System Operator and all electricity distributors in proportion to the amount of electricity they distribute. This levy is designed to collect $54 million in revenues to fund the Ministry of Energy and Infrastructure.

The study notes that the Ontario government may use regulations which are not approved by the Legislature to set fees to recover the cost of goods and services they provide to people being charged the fee. However it is argued the government may not use a regulation to fund the general activities of government. Under the Constitution Act taxes are either direct or indirect. Under Canadian law direct taxes are paid by the person on whom the charges are levied while indirect taxes are passed on to others as in the case of sales taxes. Under section 92 of the Constitution Act the provinces have jurisdiction to levy direct taxes but not indirect taxes. In the end the issue is whether the levy is a fee for the use of electricity or whether it is a tax supporting government spending. The study notes that the courts could consider the levy to be in indirect tax because it is collected from distributors in proportion to their electricity sales and supports government spending independent of the cost of goods sold. As a indirect tax it would not be within the provinces legislative authority. The study is available at www.cdhowe.org.

SOURCE: LawDay