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Under the current federal tobacco stamping regime, stamps or tear tapes (i.e., a coloured ribbon that is wrapped around a cigarette package) are required to be affixed to tobacco product packages to indicate that the federal excise duty has been paid. The form, colour and other information that may be required on the stamp or tear tape are set out under regulations to the Excise Act, 2001 by the Minister of National Revenue. They assist enforcement officials and consumers in distinguishing legitimate duty-paid tobacco products from counterfeit or contraband products.
In support of the health objective of reducing smoking, Budget 2005 announced measures to improve tobacco taxation compliance and enforcement, including enhancements to the stamping regime. Since then, the Canada Revenue Agency has been consulting with stakeholders. To ensure that the tobacco tax system continues to support the Government's health goals, Budget 2008 proposed a number of further changes to enhance tobacco taxation enforcement and compliance, and minor changes to the duty on certain tobacco products. In September 2008, the Minister of National Revenue unveiled a proposed new excise stamp for tobacco products, which would contain a number of overt and covert security features.
Proposed Enhanced Stamping Regime for Tobacco Products
The proposed new stamp would be applied to both domestic and imported tobacco product packages intended for the Canadian market. The new stamp's sophisticated security features will make contraband and counterfeit products more difficult to produce and easier to detect.
To further support the new stamp's effectiveness in combatting illicit tobacco products, the tobacco taxation framework will be amended to make excise stamps a controlled product under the tobacco taxation framework. This will require the introduction of new controls over the production, distribution and possession of the tobacco stamps, as well as various related penalties and safeguards.
The proposed legislative amendments to the Excise Act, 2001 and the Customs Act announced by the Minister of Finance set out the new controls and rules related to the enhanced tobacco stamping regime. The proposed enhanced stamping regime for tobacco products will:
- Allow the Minister of National Revenue to authorize a single provider (i.e., a specialized printer) to supply the stamps to persons approved by the Canada Revenue Agency;
- Limit the possession of excise stamps to persons involved in the legal stamping of tobacco products;
- Require tobacco manufacturers and importers to post a security (in an amount to be determined under regulations by the Canada Revenue Agency) prior to obtaining excise stamps;
- Require persons who are issued excise stamps to maintain records and account for the stamps;
- Establish a specific penalty for stamps that are unaccounted for and other penalty and offence provisions related to the illegal production of, or trade in, excise stamps; and
- Provide the necessary regulatory powers for the Canada Revenue Agency to administer the new system (e.g., the manner in which the stamps are issued).
Transitional rules may be announced at a later date, if necessary and appropriate, to facilitate the implementation of the enhanced stamping regime.
Coming Into Force
To give both affected industries and the Canada Revenue Agency time to prepare for the implementation of the enhanced tobacco products stamping regime, there may be a delay between the time the proposed amendments receive Royal Assent and their coming into force. The proposed amendments will take effect on a date to be set by the Governor in Council.- News Release 2009-075 -