Energy sector and agriculture: federal revenue forgone from tax provisions
On June 15, 2023, PBO published the report “Update on the energy sector and agriculture: federal revenue forgone from tax provisions” which examined the cost of tax provisions specific to fossil fuel development and the lost revenue from exemptions to the federal fuel charge for agriculture. The PBO was requested to provide the estimated forgone revenue from the federal fuel charge exemption in agriculture on an annual basis from 2023 to 2030. This additional analysis contains the additional information.
On June 15, 2023, PBO published the report “Update on the energy sector and agriculture: federal revenue forgone from tax provisions” which examined the cost of tax provisions specific to fossil fuel development and the lost revenue from exemptions to the federal fuel charge for agriculture. The PBO was requested to provide the estimated forgone revenue from the federal fuel charge exemption in agriculture on an annual basis from 2023 to 2030. This additional analysis contains the additional information.
It is estimated the foregone revenue from the federal fuel charge exemption[^1] to agriculture will reach $595 million as of 2023 and $1,562 million as of 2030 in the absence of substitution effects. While the average per farm is significant, it is skewed due a relatively small number of larger farms for which the exemption represents higher amounts. It is necessary to note that the calculation of the foregone revenue omits behavioural responses by farmers. Having no behavioural response implies that the estimate is an upper bound of foregone revenue. Additionally, the above estimate does not account for potential changes to removing the exemption due to international competition (e.g., Dobson, 2021)[^2].