Tobacco Tax Amendments Act, 2001 (S.C. 2001, c. 16)

Assented to 2001-06-14

Tobacco Tax Amendments Act, 2001

S.C. 2001, c. 16

Assented to 2001-06-14

An Act to amend the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act in respect of tobacco

SUMMARY

This enactment implements tobacco tax measures announced by the Minister of Finance on April 5, 2001 as part of the government’s initiative to reduce tobacco consumption in Canada, especially among youth. It also implements a measure proposed in Budget 2000 reducing the exemption threshold under the tax on exports of tobacco products before April 6, 2001.

The amendments to the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act and the Income Tax Act announced on April 5, 2001 implement new tax measures with respect to domestic tobacco tax rates, exports of tobacco products, tobacco products sold in duty free shops or as ships’ stores, and tobacco products imported by resident travellers, as well as changes to the surtax on tobacco manufacturing profits.

Tobacco Excise Tax Rate Increases. The amendments increase excise tax rates by $2.00 per carton on cigarettes for sale in Ontario and Quebec, $1.35 per carton in Prince Edward Island, 30 cents per carton in New Brunswick and 10 cents per carton in Nova Scotia. The amendments increase excise taxes on tobacco sticks by $1.00 per 200 sticks nation-wide, and on manufactured tobacco other than cigarettes and tobacco sticks by $2.80 per 200 grams on products for sale in Ontario and by $1.00 per 200 grams on products for sale in other provinces and the territories. These tax increases are effective April 6, 2001.

Tax on Exports of Tobacco Products. This enactment implements the Budget 2000 proposal to reduce the exemption threshold under the tax on exports of tobacco products before April 6, 2001 from 2.5% to 1.5% of a manufacturer’s production of tobacco products in the previous calendar year.

The amendments also implement the April 5, 2001 proposal to impose a new two-tiered tax on exports of tobacco products. For exports up to 1.5% of a manufacturer’s production in the preceding calendar year, a new excise tax is imposed at a rate of $10 per carton for cigarettes, $7 per 200 sticks for tobacco sticks, and $6 per 200 grams for manufactured tobacco other than cigarettes and tobacco sticks. The amendments authorize the Minister of National Revenue to refund this tax where the importer provides evidence satisfactory to the Minister that all taxes and duties imposed at the national level under the laws of the foreign country into which the tobacco products are imported have been paid.

For exports over 1.5% of a manufacturer’s production in the preceding calendar year, the amendments impose the current excise duty on tobacco products plus a new excise tax. The sum of the excise duty and excise tax is $22 per carton for cigarettes, $16 per 200 sticks for tobacco sticks, and $12 per 200 grams for manufactured tobacco other than cigarettes and tobacco sticks.

The amendments related to the new two-tiered export tax are effective April 6, 2001.

Tax on Tobacco Products for Sale in Duty Free Shops. The amendments impose excise duty and a new excise tax on Canadian-manufactured tobacco products delivered to duty free shops in Canada, or exported for delivery to foreign duty free shops, payable by the domestic manufacturer. The sum of excise duty and excise tax is $10 per carton for cigarettes, $7 per 200 sticks for tobacco sticks, and $6 per 200 grams for manufactured tobacco other than cigarettes and tobacco sticks. The amendments also impose an equivalent excise tax on imported tobacco products delivered to a duty free shop in Canada, payable by the operator of the duty free shop. The tax on imported tobacco products will be refunded on the first carton or equivalent of each product category sold to an individual who is not a resident of Canada and who exports the product. These measures are effective April 6, 2001.

Tax on Tobacco Products Delivered as Ships’ Stores. The amendments impose excise duty and a new excise tax on Canadian-manufactured tobacco products delivered as ships’ stores in Canada, or exported for delivery as foreign ships’ stores, payable by the domestic manufacturer. The sum of excise duty and tax is $10 per carton for cigarettes, $7 per 200 sticks for tobacco sticks, and $6 per 200 grams for manufactured tobacco other than cigarettes and tobacco sticks. These measures are effective April 6, 2001.

Duty on Traveller’s Tobacco Products. The amendments impose a new duty under the Customs Tariff on manufactured tobacco products imported by a resident of Canada under the terms of the traveller’s allowance. The new duty is imposed at a rate of $10 per carton for cigarettes, $7 per 200 sticks for tobacco sticks, and $6 per 200 grams for manufactured tobacco other than cigarettes and tobacco sticks. This duty will not be imposed on tobacco products imported by an individual for personal use that are stamped in accordance with the Excise Act and on which excise duty has been imposed under that Act. These amendments are effective October 1, 2001.

Tobacco Manufacturers’ Surtax. The amendment increases the rate of the existing surtax imposed under the Income Tax Act on a corporation’s tax on profits from tobacco manufacturing. The rate increase is from 40% to 50% for taxation years ending after April 5, 2001, and is prorated for any taxation year straddling that date.

Miscellaneous Amendments. This enactment also implements a number of related and consequential measures, including provisions related to the application of interest in respect of taxes or duties amended or implemented by this enactment, new restrictions on the entry of tobacco products into bonding warehouses, and on their subsequent removal, and new stamping requirements and new offence and penalty provisions.

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

Marginal note:Short title

 This Act may be cited as the Tobacco Tax Amendments Act, 2001.

R.S., c. 1 (2nd Supp.)CUSTOMS ACT

Marginal note:1993, c. 25, s. 70(1)
  •  (1) Paragraph 24(1)(c) of the Customs Act is replaced by the following:

  • (2) Subsection (1) is deemed to have come into force on April 6, 2001.

1997, c. 36CUSTOMS TARIFF

  •  (1) Subsection 21(2) of the Customs Tariff is replaced by the following:

    • Marginal note:Duty on tobacco imported by traveller

      (2) There shall be levied on traveller’s tobacco, at the time of its importation, and paid in accordance with the Customs Act, a duty of

      • (a) $0.05 per cigarette, in the case of cigarettes;

      • (b) $0.035 per stick, in the case of tobacco sticks; and

      • (c) $0.03 per gram, in the case of manufactured tobacco other than cigarettes and tobacco sticks.

    • Marginal note:Exception — excise duty-paid manufactured tobacco

      (3) A duty shall not be levied under this section on manufactured tobacco imported by an individual for their personal use if it is stamped in accordance with the Excise Act and duty has been imposed on it under section 200 of that Act.

    • Marginal note:Definitions

      (4) The definitions in this subsection apply in this section.

      “goods subject to excise”

      « marchandises assujetties à l’accise »

      “goods subject to excise” means

      • (a) beer or malt liquor, within the meaning of the Excise Act, of heading No. 22.03 or of tariff item No. 2202.90.10 or 2206.00.80;

      • (b) spirits, within the meaning of the Excise Act, of an alcoholic strength by volume exceeding 22.9% volume, of tariff item No. 2204.21.32, 2204.29.32, 2205.10.30, 2205.90.30, 2206.00.22, 2206.00.72 or 2206.00.92;

      • (c) spirits, within the meaning of the Excise Act, of heading No. 22.07 or 22.08, other than of tariff item No. 2207.20.11, 2207.20.90, 2208.90.30 or 2208.90.91;

      • (d) cigars or manufactured tobacco of tariff item No. 2402.10.00, 2402.20.00, 2403.10.00, 2403.91.90, 2403.99.10 or 2403.99.90; or

      • (e) goods referred to in any of paragraphs (a) to (d) that are classified with the container in which they are imported.

      “traveller’s tobacco”

      « tabac du voyageur »

      “traveller’s tobacco” means manufactured tobacco that is imported by a person at any time and

      • (a) is classified under tariff item No. 9804.10.00, 9804.20.00, 9805.00.00 or 9807.00.00; or

      • (b) would be classified under tariff item No. 9804.10.00 or 9804.20.00 but for the fact that the total value for duty as determined under section 46 of the Customs Act of all goods imported by the person at that time exceeds the maximum value specified in that tariff item.

  • (2) Subsection (1) is deemed to have come into force on April 6, 2001, except that subsection 21(2) of the Act, as enacted by subsection (1), does not apply to tobacco imported before October 1, 2001.

  •  (1) Paragraph 83(a) of the Act is replaced by the following:

    • (a) in the case of goods that would have been classified under tariff item No. 9804.10.00 or 9804.20.00, the value for duty of the goods shall be reduced by an amount equal to that maximum specified value and, in the case of alcoholic beverages and tobacco, the quantity of those goods shall, for the purposes of assessing duties other than a duty under subsection 21(2), be reduced by the quantity of alcoholic beverages and tobacco up to the maximum quantities specified in tariff item No. 9804.10.00 or 9804.20.00, as the case may be;

  • (2) Subsection (1) comes into force or is deemed to have come into force on October 1, 2001.

  •  (1) Section 92 of the Act is amended by adding the following after subsection (2):

    • Marginal note:Non-application to Canadian manufactured tobacco

      (3) This section does not apply to any tax imposed under Part III of the Excise Tax Act, or any duty imposed under the Excise Act, in respect of manufactured tobacco that is manufactured or produced in Canada.

  • (2) Subsection (1) is deemed to have come into force on April 6, 2001, except that subsection 92(3) of the Act, as enacted by subsection (1), does not apply to manufactured tobacco entered into a bonding warehouse before that day.

  •  (1) Note 4 to Chapter 98 of the List of Tariff Provisions set out in the schedule to the Act is replaced by the following:

    • 4. 
      For the purpose of this Chapter, “duties” means duties or taxes levied or imposed on imported goods under Part 2 of the Act (other than subsection 21(2)), the Excise Act, the Excise Tax Act, the Special Import Measures Act or any other Act of Parliament relating to customs.
  • (2) Subsection (1) comes into force or is deemed to have come into force on October 1, 2001.

R.S., c. E-14EXCISE ACT

Marginal note:1993, c. 25, s. 32(1); 1999, c. 17, par. 144(1)(c)(E)
  •  (1) The portion of the definition “cigar stamp” in section 6 of the Excise Act before paragraph (a) is replaced by the following:

    “cigar stamp”

    « estampille de cigares »

    “cigar stamp” means any stamp required by this Act and the ministerial regulations to be affixed to a cigar, or a package, carton, box, crate or other container containing cigars, entered for consumption or imported into Canada, to indicate

  • Marginal note:1994, c. 37, s. 2; 1999, c. 17, par. 144(1)(c)(E)

    (2) The portion of the definition “tobacco stamp” in section 6 of the Act before paragraph (a) is replaced by the following:

    “tobacco stamp”

    « estampille de tabac »

    “tobacco stamp” means any stamp required by this Act and the ministerial regulations to be impressed on, printed on, marked on, indented into or affixed to a cigarette, or a package, carton, box, crate or other container containing manufactured tobacco, entered for consumption or imported into Canada, or to be affixed to Canadian raw leaf tobacco entered for consumption, to indicate

  • (3) Section 6 of the Act is amended by adding the following in alphabetical order:

    “foreign duty free shop”

    « boutique hors taxes à l’étranger »

    “foreign duty free shop” has the meaning assigned by subsection 2(1) of the Excise Tax Act;

    “foreign ships’ stores”

    « provisions de bord à l’étranger »

    “foreign ships’ stores” has the meaning assigned by subsection 2(1) of the Excise Tax Act;

  • (4) Subsection (3) is deemed to have come into force on April 6, 2001.

  •  (1) The Act is amended by adding the following after section 52:

    Marginal note:Limitation on entry of tobacco into bonding warehouse

    52.1 Manufactured tobacco shall not be entered into a bonding warehouse if it is intended to be removed for

    • (a) delivery to a duty free shop licensed as such under the Customs Act;

    • (b) export for delivery to a foreign duty free shop;

    • (c) export for delivery as foreign ships’ stores;

    • (d) entry into a bonded warehouse, licensed as such under the Customs Tariff; or

    • (e) delivery as ships’ stores in accordance with the regulations made under the Customs Tariff and the Excise Tax Act.

  • (2) Subsection (1) is deemed to have come into force on April 6, 2001.

Marginal note:R.S., c. 7 (2nd Supp.), s. 63(1); 1993, c. 25, s. 37; 1995, c. 41, s. 109; 1999, c. 17, par. 144(1)(n)(E)
  •  (1) Section 58 of the Act is replaced by the following:

    Marginal note:Transfer of goods other than cigars and manufactured tobacco in bond
    • 58. (1) Goods, other than cigars and manufactured tobacco, warehoused under this Act may, without payment of duty, be transferred or removed from one bonding warehouse to another in bond, exported in bond or released from bond to accredited representatives for their personal or official use, if the transfer, removal, exportation or release is in accordance with the regulations and the ministerial regulations.

    • Marginal note:Removal to customs bonded warehouse or duty free shop

      (2) Goods subject to excise, other than cigars and manufactured tobacco, may, without payment of duty, be removed from a bonding warehouse

      • (a) to a bonded warehouse, licensed as such under the Customs Tariff, if the goods are

        • (i) designated for delivery as ships’ stores,

        • (ii) for sale to accredited representatives for their personal or official use, or

        • (iii) for export; or

      • (b) to a duty free shop, licensed as such under the Customs Act, if the goods are for sale to persons who are about to leave Canada.

    • Marginal note:Delivery and sale to be in accordance with regulations

      (3) Goods removed under subsection (2) shall be delivered and sold in accordance with any ministerial regulations that apply.

    Marginal note:Definitions
    • 58.1 (1) The definitions in this subsection apply in this section.

      “foreign brand tobacco”

      « tabac de marque étrangère »

      “foreign brand tobacco” means tobacco in respect of which the excise tax imposed under section 23.13 of the Excise Tax Act is not payable because of section 23.3 of that Act.

      “manufactured tobacco”

      « tabac fabriqué »

      “manufactured tobacco” does not include partially manufactured tobacco or foreign brand tobacco.

      “partially manufactured tobacco”

      « tabac partiellement fabriqué »

      “partially manufactured tobacco” means a tobacco product made by a tobacco manufacturer that is cut filler or cut rag or that is manufactured less fully than cut filler or cut rag.

    • Marginal note:Categories of manufactured tobacco

      (2) For the purposes of subsection (4), each of the following constitutes a category of manufactured tobacco:

      • (a) cigarettes;

      • (b) tobacco sticks; and

      • (c) manufactured tobacco other than cigarettes and tobacco sticks.

    • Marginal note:Removal of manufactured tobacco in bond

      (3) Manufactured tobacco may, without payment of duty, be removed from a bonding warehouse only if

      • (a) it is

        • (i) removed by its manufacturer and exported in bond in accordance with subsection (4) and not for delivery to a foreign duty free shop or as foreign ships’ stores,

        • (ii) removed by its manufacturer and entered into another bonding warehouse in bond, or

        • (iii) released to accredited representatives for their personal or official use; and

      • (b) the removal and exportation, entry or release, as the case may be, are in accordance with the regulations and the ministerial regulations.

    • Marginal note:Maximum quantity permitted to be exported in bond

      (4) A tobacco manufacturer shall not, at a particular time in a calendar year, remove a particular quantity of a category of manufactured tobacco from the manufacturer’s bonding warehouse for export in bond if the total quantity of that category of manufactured tobacco removed in the year up to that time by the manufacturer from a bonding warehouse for export in bond, plus the particular quantity, exceeds 1.5% of the total quantity of manufactured tobacco of that category manufactured by the manufacturer in the preceding calendar year.

    • Marginal note:Quantities to be excluded for the purpose of subsection (4)

      (5) The total quantities referred to in subsection (4) shall not include any quantity of manufactured tobacco that was exported by the manufacturer for delivery to a foreign duty free shop or as foreign ships’ stores.

    • Marginal note:Removal of cigars in bond

      (6) Cigars may, without payment of duty, be removed from a bonding warehouse only if

      • (a) they are

        • (i) removed by their manufacturer and

          • (A) exported in bond,

          • (B) entered into another bonding warehouse in bond,

          • (C) entered into a bonded warehouse, licensed as such under the Customs Tariff, if the person entering the cigars into the bonded warehouse certifies to the manufacturer that they are for delivery as ships’ stores in accordance with the regulations made under the Customs Tariff and the Excise Tax Act,

          • (D) transferred to a duty free shop, licensed as such under the Customs Act, if the operator of the duty free shop certifies to the manufacturer that the cigars are for sale to persons who are about to leave Canada, or

          • (E) delivered as ships’ stores in accordance with the regulations made under the Customs Tariff and the Excise Tax Act, or

        • (ii) released to accredited representatives for their personal or official use; and

      • (b) the removal and export, entry, transfer, sale, delivery or release, as the case may be, are in accordance with the regulations and the ministerial regulations.

    • Marginal note:Removal of partially manufactured tobacco or foreign brand tobacco in bond

      (7) Partially manufactured tobacco or foreign brand tobacco may, without payment of duty, be removed by its manufacturer from a bonding warehouse only if

      • (a) it is entered into another bonding warehouse in bond or exported in bond and not for delivery to a foreign duty free shop or as foreign ships’ stores; and

      • (b) the removal and entry or export, as the case may be, are in accordance with the regulations and the ministerial regulations.

    • Marginal note:Diversion

      (8) A person who has acquired goods that are manufactured tobacco, foreign brand tobacco or cigars is liable to pay the duty that would have been payable on the goods at the time the goods were completely manufactured, if the goods

      • (a) have been relieved, under this Act or otherwise, from the duty because of the purpose for which the person acquired them;

      • (b) are removed from a bonded warehouse licensed as such under the Customs Tariff, sold or used by the person for another purpose; and

      • (c) would not have been relieved from the duty if the person had acquired them for the other purpose.

    • Marginal note:Duty payable at time of acquisition

      (9) The duty a person is liable to pay under subsection (8) on goods is deemed to have become payable by the person at the time the person acquired the goods.

  • (2) Subsection (1) is deemed to have come into force on April 6, 2001, except that

    • (a) subsections 58(1), (3) and (4) of the Act, as they read immediately before that day, apply to manufactured tobacco (as defined in section 6 of the Act) entered into a bonding warehouse before that day and are subject to subsection 58.1(4) of the Act, as enacted by subsection (1);

    • (b) subsections 58.1(3) and (7) of the Act, as enacted by subsection (1), do not apply to tobacco entered into a bonding warehouse before that day; and

    • (c) subsection 58.1(4) of the Act, as enacted by subsection (1), does not apply to tobacco exported for delivery to a foreign duty free shop or as foreign ships’ stores if it had been entered into a bonding warehouse before that day.

 
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