May 2016

The federal budget tabled by the Minister of Finance on March 22, 2016 proposes to enhance the security and collection provisions in the Excise Act, 2001 (the Act). The maximum amount of security required for a person to obtain a tobacco licence or excise stamps for tobacco products would increase from $2 million to $5 million and the Minister of National Revenue would have the authority to require security for payment of outstanding amounts under the Act. These measures are included in Bill C-15, the Budget Implementation Act, 2016, No. 1, which received First Reading in the House of Commons on April 20, 2016.

Security provisions

Under the Act, manufacturers of tobacco products must hold a tobacco licence and all tobacco products for entry into the Canadian duty-paid market must have an excise stamp affixed to them. Tobacco manufacturers and other prescribed persons that import tobacco products must provide and maintain security with the CRA in order to be issued a tobacco licence or any excise stamps. The amount of security is generally based on monthly excise duty remittances or the quantity of unaffixed excise stamps issued or to be issued, up to a maximum amount of $2 million. Effective on the later of the day of royal assent or June 22, 2016, the maximum amount of security would be increased from $2 million to $5 million. This would ensure that the security requirement better reflects the current tobacco duty rates.

Collection provisions

Generally, when a person objects to, or appeals, an assessment of an amount payable under the Act, the CRA is restricted from taking certain collection actions while a decision or judgment is pending. Also, the Act does not impose any obligation on the person to ensure payment of the amount that has been assessed. To allow certain enforcement measures under the Act, the budget proposes to give the Minister of National Revenue the authority to require security for payment of assessed amounts and penalties in excess of $10 million that are not otherwise collected under the Act. Also, if the requested security is not provided, the budget proposes to give the Minister authority to collect an amount equivalent to that amount of security. This measure would apply to assessed amounts and penalties for which a person becomes liable after the day of royal assent to the enacting legislation.

Further information