Report 3—Tax Subsidies for Fossil Fuels—Department of Finance Canada
At a Glance Report 3—Tax Subsidies for Fossil Fuels—Department of Finance Canada
What we examined (see Focus of the audit)
This audit focused on whether the Department of Finance Canada provided advice to support decision making on inefficient tax subsidies for fossil fuels that was based on analysis of all relevant and reliable information.
Why we did this audit
This audit is important because inefficient fossil fuel subsidies encourage wasteful consumption, undermine efforts to address climate change, and discourage investment in clean energy sources. Without providing decision makers with advice based on complete assessments, the Department of Finance Canada cannot ensure that it is providing the support needed by the Minister for Canada to meet its Group of 20G20 commitment by 2025.
Overall, we found that the Department of Finance Canada’s assessments to identify inefficient tax subsidies for fossil fuels were incomplete, and that advice it provided to the Minister was not based on all relevant and reliable information.
The Department of Finance Canada conducted an overall assessment of tax expenditures—which reduce taxes payable by certain taxpayers and the amount of revenue that the government would collect—and identified those that provided a specific advantage to the fossil fuel sector as subsidies. At the end of June 2018, the Department had also begun assessing 2 of the 12 benchmark tax measures—general tax measures in the tax system—specific to the fossil fuel sector to identify those that could potentially be fossil fuel subsidies.
The Department of Finance Canada did not clearly define how a tax subsidy for fossil fuels would be inefficient. The Department’s assessments focused almost exclusively on fiscal and economic considerations and did not consider the integration of economic, social, and environmental sustainability in subsidizing the fossil fuel sector over the long term.
What we found about …
Identification of inefficient tax subsidies
Entity Responses to Recommendations
The entity does not agree with our recommendation and has responded (see Recommendation).
|Report of the||Commissioner of the Environment and Sustainable Development|
|Type of product||Performance audit|
|Completion date||28 February 2019|
|Tabling date||2 April 2019|
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