Evidence of meeting #122 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was aiib.
A recording is available from Parliament.
November 6th, 2017 / 3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
I call the meeting to order. Pursuant to Standing Order 108(2), this is a continuation of the subject matter of Bill C-63, a second act to implement certain provisions of the budget tabled in Parliament on March 22, 2017, and other measures.
We went through a couple of parts of Bill C-63. Today we'll start with part 3, the Excise Act.
From the Department of Finance we have Mr. Coulombe, chief of the sales tax division in the tax policy branch.
Welcome, Gervais. The floor is yours.
3:50 p.m.
Gervais Coulombe Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Thank you, Mr. Chair.
I'm here to speak to two measures in Bill C-63, Budget Implementation Act, 2017, No. 2.
The first measure I'll be describing is in part 3 and has to do with the taxing of beer. The measure is dealt with in clauses 165 to 168, which amend the Excise Act so that beer made from beer concentrate for consumption on the premises is taxed in a manner that is consistent with other beer products.
The Government of Canada generally applies an excise duty on such alcohol products as beer, wine, and spirits that enter into the Canadian duty-paid market. The regular excise rate on beer is equivalent to $2.61 per 24 bottles of beer. It has been brought to the attention of the government that as a result of existing excise rules, new ways to sell draft beer may be taxed twice—first as spirits, given their high alcohol content, during the manufacturing process, and secondly as beer, once transformed into a form ready for consumption, at the point of sale.
This measure amends the Excise Act to ensure that beer concentrate is appropriately taxed according to the maximum quantity of beer that can be transformed at the point of sale in a manner approved by the Minister of National Revenue from that concentrate. Beer concentrate will not be taxed as spirits during the manufacturing process.
Public consultations on the measure were conducted in the past couple of months. The proposal appeared in the news release put out by the Minister of Finance on September 8.
I'd be glad to answer any questions you have on part 3 of the bill.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Coulombe.
I take it this is a request from industry to make that change.
3:50 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
That's correct, yes.
3:50 p.m.
Liberal
3:50 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Chair.
I want to make sure I fully understand. The purpose of the measure is to ensure that a product with high alcohol content being transformed into beer is not taxed twice. Is that correct?
3:50 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
That's exactly right. They are new products entering the market. They are not already on the market.
3:50 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Basically, it is beer from which the water has been removed, resulting in a lighter concentrate that is easier to transport and takes up less space. The water will be added at the bar or the location where the draft beer will be drawn.
The excise tax legislation dates back to the 19th century and is no longer appropriate. This is what is known as a housekeeping amendment, meant to address this new practice in the beer sector.
3:50 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Microbreweries in my riding, then, will not see any difference. Is that correct?
3:50 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
If they start adopting this practice, they will benefit from the amendment.
3:50 p.m.
Liberal
The Chair Liberal Wayne Easter
Are we all done? Okay.
Thank you. That deals with part 3.
We'll turn now to part 4, the Federal-Provincial Fiscal Arrangements Act.
You're on for this one as well, Mr. Coulombe.
3:50 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Thank you, Mr. Chair.
Let's move on to cannabis taxation. This measure is under clauses 169 to 171 of the bill. It amends the Federal-Provincial Fiscal Arrangements Act to allow the Minister of Finance on behalf of the Government of Canada, with the approval of the Governor in Council, to enter into coordinated cannabis taxation agreements with provincial governments. Such agreements currently exist—for example, in the context of the harmonized sales tax.
Among other things, these agreements would allow for the application of cannabis product taxes—under a single act of Parliament—that would be collected, administered, and enforced by Canada, and that would have rates that may be set on a province-by-province basis. The agreements would also permit the Government of Canada to make payments to the government of a province in respect of the revenues from cannabis taxation.
A coordinated approach to the taxation of cannabis would help to reduce the amount of contraband cannabis on the future legal market, while supporting other key objectives such as keeping cannabis out of the hands of youth and reducing compliance costs for businesses.
The authority to implement the federal cannabis tax rate and the additional rate with respect to the provinces and territories entering into the coordinated cannabis taxation agreement will follow the usual legislative and regulatory process in due course. Those amendments do not appear in the bill before you. This simply involves the ability to continue negotiations with the provinces.
That concludes my presentation on part 4 of the bill.
3:50 p.m.
Liberal
Michael McLeod Liberal Northwest Territories, NT
Thank you, Mr. Chair.
I just wanted to get clarification. Does this amendment to the Federal-Provincial Fiscal Arrangements Act also apply to territorial governments and if it doesn't, how are the territories incorporated into the cannabis tax framework?
3:55 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
My understanding is that it does. If it does not, we'll come back with some clarification.
3:55 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
Based on the Interpretation Act, usually in federal legislation, a reference to province includes territories. Again, my understanding is that it does apply to potential territorial arrangements. If it does not, we'll come back to the committee with a clarification because the intent of the government is to negotiate with territories as well.
3:55 p.m.
Liberal
The Chair Liberal Wayne Easter
If you could double-check that, it would be great.
Go ahead, Mr. Albas.
3:55 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
Thank you, Mr. Chair.
Thank you for your presence here today. There are no numbers in here, but there has been an announcement by the Minister of Finance saying that 50% would go to the provinces and 50% would go to the federal government from established excise tax. It doesn't appear that this is in here. Basically, it allows the finance minister the authority, obviously through a delegated authority.... I guess he has to take it to the cabinet for approval. Is that correct?
3:55 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
This is correct. The details and the excise duty framework itself will probably be announced by the government in the near future, but the amendments that are here are only able to allow the continuous negotiations with provinces.
3:55 p.m.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
If an individual province was unhappy with the announcement and perhaps said they were going to be taking on more of the load, they could theoretically negotiate a different agreement with the federal government. Is that correct?
3:55 p.m.
Chief, Sales Tax Division, Tax Policy Branch, Department of Finance
We're leaving the purpose of the amendments here a little bit, but the amendments themselves do not define what could be part of the final—
3:55 p.m.
Conservative