25 February 2003 Excise Interpretation 44380 - Implementation of "New" Excise Duty Under Excise Act

Dear XXXXX:

Thank you for your e-mail XXXXX which was sent first to XXXXX the Department of Finance, concerning the implementation of the Excise Act, 2001 ("new Act") and the effective date of the new rates of excise duty. Your particular concern is with respect to the impact the new rates of excise duty will have on the valuation of finished tobacco products still in your company's inventories on the day the new Act is implemented.

We anticipate that the new Act will be implemented on July 1, 2003 ("implementation date"). As you are aware, the new rates of excise duty under Schedule 1 will combine the excise duty and excise tax rates that are now levied on tobacco products separately under the Excise Act and Excise Tax Act, respectively. Under the transitional provisions of subparagraph 316(1)(a)(ii) of the new Act, the Excise Act, 2001 will apply to tobacco products manufactured in Canada that have not yet become excise tax payable (that is, not yet delivered from their manufacturer's inventory) as though they were manufactured on implementation date. The effect of this will be to cause the "new" excise duty to become payable on implementation date itself, and at the rates that take effect on that day. (Of course, the provisions of subsection 316(2) of the new Act will allow the current excise duty payable on Canadian-made tobacco products to be refunded to manufacturers for any such goods still in their inventories at the beginning of implementation date.)

Accordingly, the value of any finished tobacco products still in a manufacturer's inventory on implementation date should be based on the excise duty rates that are in effect on that day.

This interpretation is based on the provisions of the new Excise Act, 2001 that is scheduled to be implemented as indicated above. Future amendments to the new Act could affect the information contained herein.

Should you require further information, please do not hesitate to contact me at (613) 957-8154 or Steve Mosher, at (613) 941-1497.

Sincerely,

Preston Gallant, CGA
Manager
Excise Duty Operations
Excise Duties and Taxes Division

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