Finance Committee on Nov. 1st, 2018

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Gervais Coulombe]

The government has undertaken to authorize regulated and restricted access to cannabis to keep that substance out of the hands of young people and to deprive criminals of the profits that derive from the cannabis trade. To do so, it will have to keep duties at low levels and cooperate with the provinces and territories in pursuing a coordinated taxation approach.

Statutory amendments to the Excise Tax Act, 2001, associated with the new federal excise duty framework, were implemented by Budget Implementation Act, 2018, No. 1.

The federal government subsequently signed agreements with most provincial and territorial governments to implement a coordinated taxation framework for cannabis. Regulations outlining the additional excise duty rates for each provincial and territorial signatory to the coordinated framework were announced on September 17, 2018.

The entire framework came into force on October 17, 2018, on which date non-medical cannabis became available for legal retail sale. Currently, cannabis products are generally subject to a combined federal-provincial tax that is not to exceed the higher of $1 per gram or an ad valorem rate of 10% of the producer’s selling price.

Clause 63 of part 3 implements amendments to the Excise Act, 2001, to introduce an anti-avoidance rule relating to the rules for establishing the value of a cannabis product on which the ad valorem duty is calculated to ensure that the cannabis duties are calculated on the appropriate value in certain circumstances.

In particular, this technical amendment would ensure that the ad valorem duty applies as intended on the producer's set price of the cannabis product or on the fair market value of the product in the case of a non-arm's-length transaction. To align with the announcement of the regulations, this measure is deemed to have come into force on September 17, 2018.

[The Chair, Liberal, Wayne Easter]

Thank you.

We'll go to a question, but the bells are ringing. We are 29 minutes away. Are we okay to continue on until seven or eight minutes before the final bell?

[An hon. member]

Agreed.

[The Chair, Liberal, Wayne Easter]

Are there any questions to Mr. Coulombe on this section?

Greg.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I would like to know why the date on which these amendments are to come into force is September 17 and not October 17.

[Pierre Mercille]

That's because September 17 is the date on which the amendment was announced.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I see. Thank you.

[The Chair, Liberal, Wayne Easter]

Peter Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

I think I know the answer to the question I'm going to ask you, but I'll ask it anyway. Has the excise tax on medical cannabis in removed?

As you know, this question has been raised by 200,000 Canadians. The error was made in the budget, but these amounts have not yet been refunded. Many members have received incalculable numbers of petitions emphasizing that medications are not taxed. I don't believe there is any indication anywhere that this excise tax has been removed. I suppose that means it will be maintained after the bill passes.

[Gervais Coulombe]

With respect to cannabis, the excise duties that were included in the Excise Act, 2001 by last June's budget bill are not amended by this bill. Cannabis products with THC concentrations of less than 0.3% are still exempt from cannabis duties. However, the regime that was announced in the preceding months has undergone no changes in that respect.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

So that means medical cannabis is still subject to the excise tax.

[Gervais Coulombe]

The excise tax that applies to medical and non-medical cannabis is currently the same. Some products are exempted, such as industrial hemp and products that have THC concentrations of less than 0.3 % and few associated psychoactive effects.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

I want a direct answer, and I apologize for going back to this.

This means that cannabis that has higher THC concentrations but is prescribed by a physician, and is therefore medical cannabis, is still subject to the excise tax. Is that it, yes or no?

[Gervais Coulombe]

Once again, you have to look at the type of cannabis prescribed and its THC concentrations. If a product is subject to the excise tax regime, duties are payable. Remember that the system applies to cannabis production. So it's the producers who are responsible for paying those duties.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

So the answer is yes. Thank you.

[The Chair, Liberal, Wayne Easter]

The policy decision, though, that's not up to the officials to answer.

Do you have the facts that you needed?

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Yes. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you.

Are there no other questions on the cannabis section here?

The next point is the assessment period.

[Gervais Coulombe]

Mr. Chair, my colleagues Mr. Mercille and Mr. McGowan have already discussed the measures concerning the extension of the assessment period.

Those measures are outlined in part 3. The measure concerning disclosure of information appears in clause 66. As my colleague Mr. Mercille explained, the purpose of these amendments is to ensure that the administrative measures contained in the tax laws are consistent. That vastly facilitates overall administration of the regime by the Canada Revenue Agency.

That completes my presentation on part 3.

[The Chair, Liberal, Wayne Easter]

Are there any general questions left over from parts 2 and 3?

Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

In part 3, are there any changes to the applicability of HST with respect to carbon allowances?

[Gervais Coulombe]

This is not found under part 3. This is an amendment that is found under part 2. I understand that it has been decided that this amendment be studied in front of the environmental committee.

[Pierre Poilievre, Conservative, Carleton, ON]

There is no need.... Let's just do a “belt and suspenders” and study it here too. Would this change? Would this amendment apply HST to carbon allowance purchases?

[Pierre Mercille]

I can respond directly or I can do my little presentation on that measure, if you prefer.