2014 Federal Budget Review

Submitted by admin on Tue, 02/25/2014 - 20:41

The CSCB has completed a review of the Federal Budget 2014. The following items may be of interest to members. The budget, in its entirety, is available at: http://www.budget.gc.ca/2014/docs/plan/pdf/budget2014-eng.pdf.

Tariffs on Mobile Offshore Drilling Units – pg 370

The budget proposes to eliminate the 20% Most-Favoured-Nation rate of duty on imported Mobile Offshore Drilling Units. This measure will permanently eliminate a disincentive to exploration leading to oil and gas discoveries in offshore Atlantic and Arctic regions. This tariff elimination will be given effect by amendments to the Customs Tariff and will be effective for goods imported into Canada on or after May 5, 2014.

Customs Tariff Treatment of the Governor General – pg 369

Under a longstanding special exemption in the Customs Tariff, imported articles for use by the Governor General are exempted from paying customs duties. The Governor General is the only individual with such a special, extraordinary exemption. 

Building on tax amendments undertaken in the past two years concerning the Governor General, the Customs Tariff will be amended to make the Governor General subject to the same tariff rules as other Government office holders. The elimination of the exemption provided by tariff item 9809.00.00, and consequential amendments to tariff item 9833.00.00, will be given effect by amendments to the Customs Tariff.

To ensure consistent tax and tariff treatment, consequential amendments to the Goods and Services Tax/Harmonized Sales Tax importation rules will also be proposed.

Excise and Other Changes – pg 365/366

Tobacco

The budget proposes to increase the rate of excise duty on tobacco as follows:

  • Cigarettes — To $0.52575 (from $0.425) for five cigarettes or a fraction thereof
  • Tobacco sticks — To $0.10515 (from $0.085) on each tobacco stick
  • Manufactured tobacco (e.g., chewing tobacco or fine-cut tobacco) — To $6.57188 (from $5.3125) per 50 grams manufactured tobacco or a fraction thereof
  • Cigars — To $22.88559 (from $18.50) per 1,000 cigars, with additional duty from the greater of $0.067 per cigar and 67% of the sale price or duty-paid value to the greater of $0.08226 per cigar and 82% of the sale price or duty-paid value.

The budget also proposes to increase the “duty free” rate on tobacco as follows:

  • Canadian-manufactured cigarettes — To $0.52575 for five cigarettes or a fraction thereof
  • Imported cigarettes — To $0.10515 per cigarette
  • Tobacco sticks — To $0.10515 on each tobacco stick
  • Manufactured tobacco (e.g., chewing tobacco or fine-cut tobacco) — To $6.57188 per 50 grams manufactured tobacco or a fraction thereof.

These rate changes will be effective after February 11, 2014. To ensure that the excise duty rate changes are applied, the budget proposes that inventories of cigarettes held by manufacturers, importers, wholesalers and retailers at the end of February 11, 2014 be subject to a per cigarette tax of 2.015 cents. Finance says that taxpayers may use any  reasonable method for establishing their inventories of these products, including a physical count. The tax will not apply to cigarettes held in vending machines.

Finance notes that the future excise duty rates on tobacco products, including the “duty free” rates, will be indexed to the Consumer Price Index and automatically adjusted accordingly every five years. The first inflationary rate adjustment will be effective December 1, 2019.

New non-compliance penalty

The budget proposes to add a new administrative monetary penalty, and to amend the existing criminal offence, for making false statements or omissions in an excise tax return and related offences under the non-GST/HST portion of the Excise Tax Act (e.g., for fuels, fuel-inefficient vehicles and automobile air-conditioners). These provisions will be consistent with the GST/HST portion of the Excise Tax Act and will apply to excise tax returns filed after the day these measures receive Royal Assent.

Revenue Outlook – pg 271

Customs import duties are projected to increase 4.9 per cent in 2013–14, reflecting year-to-date results and projected growth in imports. The growth in customs import duties is expected to increase to 5.8 per cent in 2014–15

and 12.9 per cent in 2015–16 due to growth in imports and previously announced measures, but decline by 5.7 per cent in 2016–17, reflecting the expected introduction of the Canada-European Union Comprehensive Economic and Trade Agreement. Over the last two years of the projection period, annual growth in customs import duties is projected to average 4.5 per cent, based on projected growth in imports.

Beyond the Border Action Plan

The budget lists the Beyond the Border Action Plan accomplishments on page 105. Our members have received regular updates on the Beyond the Border initiative through participating in BCCC.