2018 Federal Budget

The Canadian government unveiled its 2018 Federal Budget on 27 February 2018.
Here are some key points as they relate to trade.

Strengthening the Canada Border Services Agency
The Canada Border Services Agency is responsible for managing Canada’s borders by enforcing laws governing trade and travel and aiding legitimate cross-border traffic, while stopping people and goods that pose a potential threat to Canada. The Canada Border Services Agency strives to maintain a high standard of service and has worked to improve processing times for the efficient and secure flow of travelers. The Government proposes to invest $85.5 million in 2018–19, to enable the Canada Border Services Agency to continue existing operations in support of the Agency’s mandate.

Tobacco Taxation
The Government proposes to advance the inflationary adjustments for tobacco excise duty so that they occur on an annual basis rather than every five years. The Government also proposes to increase the excise duty by an additional $1 per carton of 200 cigarettes, along with corresponding increases to the
excise duty rates on other tobacco products.

Cannabis Taxation, Regulation and Public Protection: Legalizing Cannabis in 2018
The Government has committed to legalize and strictly regulate and restrict access to cannabis in order to keep it out of the hands of young Canadians, and keep profits away from criminals and organized crime. To that end, in 2017 the Government introduced Bill C-45, the Cannabis Act, to establish a strict system for the cultivation, production, distribution, sale and possession of cannabis in Canada, and made strategic investments to implement and enforce the new federal legislative framework.

Pursuing New Markets
In addition to NAFTA, CETA and the CPTPP, the Government is continuing to pursue other opportunities for free trade agreements around the world, including ongoing exploratory talks with China, and discussions with a number of important partners, and regional groupings such as the Pacific Alliance (Chile, Colombia, Mexico and Peru), MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and the Association of Southeast Asian Nations (ASEAN).

NAFTA negotiations continue to impact stability of the economy; however Canada’s GDP growth since Q2 2016 rose to 3.2 versus the US at 2.4.

Transfer Pricing
Canada has adopted transfer pricing legislation and administrative guidelines are generally consistent with the Organization for Economic Co-operation and Development (OECD) Guidelines. Statutory rules require that transactions between related parties occur under arm’s-length terms and conditions. Section 247 of the Income Tax Act (Canada) (“the Act”) contains the legislation governing on transfer pricing. Information Circular 87-2R (“IC 87-2R”) provides administrative policies and guidance with respect to the application of section 247 of the Act and is cross-referenced to the OECD Transfer Pricing Guidelines.

The complete 2018 Budget Plan is available here.