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Vol. 140, No. 21 — October 18, 2006
Registration EXCISE ACT, 2001 Interest Rates (Excise Act, 2001) Regulations P.C. 2006-1056 September 28, 2006 Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to section 304 of the Excise Act, 2001 (see footnote a), hereby makes the annexed Interest Rates (Excise Act, 2001) Regulations.
REGULATORY IMPACT ANALYSIS STATEMENT (This statement is not part of the Regulations.) Description The Excise Act, 2001 (the "Act") came into force in 2003. It established a new legislative framework for the federal taxation of spirits, wine and tobacco products, and replaced the previous tax structure with an up-to-date approach that reflects current industry and administrative practices. Where a person fails to pay duty or other amounts under the Act to the Receiver General as and when required (or where the Minister of National Revenue owes an amount to a person), compound interest is payable at the prescribed rate in order to maintain the time-value of the amount owed. The Interest Rates (Excise Act, 2001) Regulations (the "Regulations") are necessary to establish the applicable rates of interest both for amounts owed to and by the Government under the new Act. The Regulations also harmonize the interest rate provisions under the Act with those of the Income Tax Act (the "ITA"), the intended standard for all federal taxing statutes under the Government's Standardized Accounting initiative. The goal of this initiative is to simplify tax compliance by businesses through the harmonization of administrative provisions across federal taxing statutes. The interest and penalty provisions on amounts owed to and by the Government under the statutes previously governing the taxation of spirits, wine and tobacco products were different from those in the ITA in three principal ways: – first, a penalty of 0.5% per month plus interest was imposed on amounts owed by a person, whereas the ITA imposes just interest and no penalty; – second, in the case of amounts owed by a person to Her Majesty, the prescribed interest rate of the ITA was either 2% or 4% higher; and – third, in the case of amounts owed by the Crown to a person, no interest was payable to the person or the prescribed interest rate was 2% lower than that payable under the ITA. The new Act does not impose a penalty on amounts owed by a person to the Government, thereby harmonizing the penalty provisions of the new Act on these amounts with those of the ITA. The Regulations are necessary to harmonize the prescribed rates of interest. Under the Regulations, the rate of interest is established quarterly. The base interest rate is the arithmetic mean, rounded to the next whole percentage, of the average equivalent yields of the Government of Canada 90-day Treasury Bills sold at auctions during the first month of the preceding quarter. The prescribed interest rate for amounts owed to Her Majesty is the base rate plus 4%; for amounts payable by the Minister, base plus 2%. All interest and yield rates are expressed as an annual percentage. As announced on June 24, 2003, the Regulations are deemed to come into force on July 1, 2003, the date on which the Act came fully into force. Alternatives The Regulations are required in order to bring into effect the underlying policy intent of applying interest on amounts owing or payable under the Act. No alternatives to the Regulations were considered, since legislation specifically provides for the rate of interest to be prescribed by regulation. Benefits and Costs Establishing interest rates for amounts owing both to and by the Government adds fairness to the tax system for all stakeholders. Harmonizing prescribed interest rates with those of the ITA will simplify tax compliance by businesses. Strategic environmental assessment A strategic environmental assessment has been conducted, and there are no important environmental effects associated with the Regulations. Consultation The enactment of the Act was the culmination of a comprehensive review of the federal legislative and administrative framework for the taxation of alcohol and tobacco products. The review was jointly undertaken by the Department of Finance and the Canada Customs and Revenue Agency (continuing as the Canada Revenue Agency – the "CRA") and encompassed extensive consultations with other federal departments, affected industries, provincial governments and liquor boards and enforcement agencies. Draft regulations, including regulations respecting interest rates, were released in December 2001, at the time the legislation implementing the Act was tabled in Parliament. Also, a notice was distributed in April 2002 by the CRA to existing and potential licence and registration holders drawing their attention to the draft regulations and asking for submissions by June 30, 2002. In addition, the Regulations were pre-published in the Canada Gazette, Part I, December 24, 2005 for a 30-day consultation period during which no comments were received. No changes were made to the Regulations since that pre-publication. Compliance and Enforcement The Act provides the necessary compliance and enforcement mechanisms for these Regulations. The CRA is responsible for the administration and enforcement of the Act. Contact
Carlos Achadinha
S.C. 2002, c. 22 |
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