On April 7th, 2022, the Canadian government tabled its 2022 Federal Budget. Here are some key points as they relate to trade.
Strengthening Canada’s Trade Remedy and Revenue Systems
Budget 2022 announces the government’s intention to introduce amendments to the Special Import Measures Act and the Canadian International Trade Tribunal Act to strengthen Canada’s trade remedy system by better ensuring unfairly traded goods are subject to duties, and increasing the participation of workers.
Budget 2022 proposes to provide $4.7 million over five years, starting in 2022-23, and $1.1 million ongoing, to the Canada Border Services Agency to create a Trade Remedy Counselling Unit that will assist companies, with a focus on small and medium-sized enterprises.
- The government also proposes to introduce amendments to the Customs Act to implement electronic payments and clarify importer responsibility for duties and taxes.
Taxation of Vaping Products
Budget 2022 proposes to implement the previously announced excise duty on vaping products, effective as of October 1, 2022. The proposed federal excise duty rate would be $1.00 per 2 ml, or fraction thereof, for containers with less than 10 ml of vaping liquid. For containers with more than 10 ml, the applicable federal rate would be $5.00 for the first 10 ml, and $1.00 for every additional 10 ml, or fraction thereof.
The federal government also invites its provincial and territorial counterparts to join a coordinated vaping taxation framework, under which an additional duty equal to the proposed federal rate would be applied. Total resulting revenues would be split between federal and provincial and territorial governments on a 50/50 basis. The overall tax burden on vaping products will be regularly reviewed to ensure that important public health objectives are being met.
Eliminating Excise Duty on Low-Alcohol Beer
Budget 2022 proposes to eliminate excise duty on low-alcohol beer, effective as of July 1, 2022. This will bring the tax treatment of low-alcohol beer into line with the treatment of wine and spirits with the same alcohol content, and make Canada’s practices consistent with those in other G7 countries.
Better Supply Chain Infrastructure
Continued investments in transportation infrastructure to help build more resilient and efficient supply chains, Budget 2022 proposes to provide $603.2 million over five years, starting in 2022-23, to Transport Canada. These investments will help lower prices for Canadians; make our supply chains stronger; improve the ability of Canadian businesses to export their goods abroad; and deliver essential goods to our communities.
These investments will also complement work the government is doing through the newly established National Supply Chain Task Force, which will work with industry, associations and experts to examine key pressures and make recommendations regarding short- and long-term actions to strengthen the efficiency, fluidity, and resiliency of transportation infrastructure and the reliability of Canada’s supply chains.
Excise Tax and Duty Revenues
Goods and Services Tax (GST) revenues are projected to rebound to $44 billion in 2021-22, or 35.7 per cent, from a very weak 2020-21 outcome that was the result of the temporary pandemic driven shutdown of large portions of the retail sector and the reduction in revenues due to the cost of the one-time enhanced GST credit payment. Over the remainder of the projection period, GST revenues are forecast to grow by 4.4 per cent per year, on average, reflecting the outlook for taxable consumption.
Customs import duties are projected to increase 19.1 per cent in 2021-22, due to the economic recovery and the reduced demand for remissions of duties due to lower-than-expected imports of personal protective equipment and other medical goods. Customs import duty revenue is then estimated to grow at an average annual rate of 6.3 per cent, driven by projected growth in imports.
Other excise taxes and duties are expected to increase to $11.1 billion in 2021-22, or 8.4 per cent, as demand recovers, before softening to growth of an average annual rate of 2.9 per cent over the remainder of the projection period, reflecting expected consumption growth of motive fuels and tobacco products, in particular.
The 2022 Federal Spring Budget is available on the Government of Canada’s website.