The Canadian government unveiled its 2017 Federal Budget. Here are the key points as they relate to trade.
Deficit – 23 Billion in 2016-17
- The budgetary balance is expected to show deficits of $23.0 billion in 2016–17 and $28.5 billion in 2017–18. Over the remainder of the forecast horizon, deficits are expected to decline gradually from $27.4 billion in 2018–19 to $18.8 billion in 2021–22. The federal debt-to-GDP ratio is projected to decline gradually after 2018–19 to the end of the fiscal horizon, reaching 30.9 per cent in 2021–22.
Least Developed Countries (LDCs)
- Budget 2017 proposes changes to these origin rules to allow more apparel products imported from LDCs into Canada – particularly from Haiti – to benefit from duty-free treatment. This measure will result in an estimated $17 million in forgone tariff revenues for the Government over five years.
Tobacco Taxation
- Budget 2017 proposes to eliminate the tobacco manufacturers’ surtax. In order to maintain the intended tax burden of the manufacturers’ surtax on tobacco products, Budget 2017 also proposes to adjust tobacco excise duty rate. The excise duty rate on cigarettes will increase from $0.52575 to $0.53900 for each five cigarettes or fraction thereof (i.e., from $21.03 to $21.56 per 200 cigarettes).
- Budget 2017 also proposes that inventories of cigarettes held by manufacturers, importers, wholesalers and retailers at the end of Budget Day be subject to a tax of $0.00265 per cigarette (subject to certain exemptions). Manufacturers, importers, wholesalers and retailers should refer to the cigarette inventory tax mechanism in the Excise Act, 2001 and Canada Revenue Agency publications for more information. Taxpayers will have until May 31, 2017 to file returns and pay the inventory tax.
Alcohol Taxation
- Budget 2017 proposes that excise duty rates on alcohol products be increased by 2 per cent effective the day after Budget Day, in respect of duty that becomes payable after that date. No special inventory tax will apply to alcohol products on which duty has been paid. In order to maintain their effectiveness, it is also proposed that the rates be automatically adjusted by the Consumer Price Index on April 1 of every year, starting in 2018
Import Duties & Excise Tax Projections
- Customs import duties are projected to remain unchanged in 2016-17 and to decrease by $0.5 billion, or 8.5 per cent, in 2017–18. This decrease reflects the elimination of most of the tariffs/duties on imports from the European Union under CETA. Over the remainder of the projection horizon, annual growth in customs import duties is projected to average 3.7 per cent based on projected growth in imports.
- Other excise taxes and duties are projected to increase by 0.9 per cent in 2016–17, consistent with year-to-date results. Over the remainder of the forecast horizon, other excise taxes and duties are expected to grow at an average annual rate of 0.7 per cent based on historical consumption trends.
MEASURES TO STRENGTHEN CANADA’S TRADE REMEDY SYSTEM
- Further to public consultations undertaken in 2016, Budget 2017 proposes a number of amendments to the Special Import Measures Act (SIMA) and related trade remedy regulations. These amendments will ensure that Canada’s trade remedy system is strengthened and keeps accounting for the views of all stakeholders, while remaining aligned with international trade rules.
Anti-Circumvention Investigations
- The SIMA will be amended to allow domestic producers to file a complaint regarding trade and business practices specifically intended to avoid trade remedy duties. With these amendments, duties may be extended to goods found to circumvent a trade remedy measure, following a formal investigation by the Canada Border Services Agency (CBSA), in which all interested parties will be able to participate.
Canada-European Union (EU) Comprehensive Economic and Trade Agreement
- In February 2017, the European Parliament voted to approve the implementation of the Canada-EU Comprehensive Economic and Trade Agreement (CETA), which was signed by leaders last October. CETA sets a new bar for progressive trade agreements that create good-paying middle class jobs, give consumers more choice and protect both workers and the environment.
- Canada and the EU will now complete their respective legislative and regulatory processes that will bring virtually all significant parts of the Agreement. Based on recent developments, CETA is now expected to enter into force in mid-2017
Message on Canada-United States Relationship
The relationship between Canada and the United States is unique and unparalleled. This deep, long-standing partnership is founded in shared geography, common values and interests, and one of the largest, most comprehensive trading relationships in the world. A majority of U.S. states count Canada as their largest export market, with more than $2 billion in two-way trade flowing across the border each day—much of that in the form of U.S. manufactured goods purchased by Canadians.
Canada and the United States share the goals of mutual energy security, a robust and secure energy grid, and up-to-date, resilient energy infrastructure. We continue to work closely with our American counterparts on clean energy innovation, including by supporting major energy infrastructure projects that further economic growth while protecting and preserving the environment. We will continue to build on the long-standing environmental cooperation between Canada and the U.S. to address climate change, as well as enhance the quality of our air and water. Likewise, we continue to work towards a new softwood lumber trade agreement that will be fair and helpful to consumers and businesses on both sides of the border.
In sum, the partnership between Canada and the United States is unique and a model to the world. We are committed to preserving and strengthening cross-border ties, for the benefit of our mutual prosperity and security.
The complete Budget document is available here.