Changes could impact on cross border rules in several ways
Canada’s 2021 budget will have several impacts for Canadian and non-resident businesses participating in international and interprovincial trade activity, a blog post by lawyers at Bennett Jones LLP has said.
The federal budget aims to finish the fight against the COVID-19 pandemic, generate jobs, and promote Canadians’ prosperity, said Chrystia Freeland, deputy prime minister and federal finance minister, in a news release on Apr. 19.
The firm’s blog post emphasized that, while the federal budget’s items are ambitious and mention many policy initiatives possibly affecting trade, many of these initiatives are proposals that may fail to push through or which the government may overhaul after public consultation and parliamentary scrutiny.
The authors explained specific changes proposed by the federal budget, including the valuation of imported goods for customs duty and cross-border goods and services tax (GST) assessment purposes, affecting non-resident importer and multinational enterprise transactions, as well as changes to the valuation rules in the Customs Act.
These proposed amendments may affect the customs duty and GST liability of Canadian companies, particularly those affiliated with foreign companies, and of foreign companies which act as non-resident importers into Canada and which facilitate inbound trade, wrote the authors. The blog post noted that the federal government did not specify whether such changes will substantively affect the legislation or merely clarify the rules.
The blog post said that the federal budget also offers support and updates regarding the CBSA Assessment and Revenue Management system. This system seeks to modernize and digitize import reporting and payment processes for commercial importers and to address feedback to the federal government’s public consultation on its plans to extend the federal GST and harmonized sales tax (HST) to sales of digital services, regular services delivered digitally and e-commerce sales by non-residents into the Canadian market.
This proposal to broaden the applicability of the GST and HST will apply to non-resident suppliers of digital products and services, and non-resident vendors of tangible goods sold using e-commerce whose sales to Canadian customers are projected to exceed $30,000 annually, to non-resident distribution platform operators and suppliers of short-term accommodation in Canada and will provide a simplified GST and HST registration and remittance framework to non-resident vendors and platform operators without a permanent establishment in Canada, the blog post explained.
The budget also covered the federal government’s intentions to arrange public consultations regarding transfer pricing and mandatory disclosure rules, and the trade remedy system as it applies to small and medium-sized enterprises. The budget also references the federal government’s efforts to address human rights considerations relating to exporters and to clarify the selection process for trade remedy dispute panels under the Canada-United States-Mexico Agreement Implementation Act, said the blog post.
The blog post also noted that the federal budget allocated:
- $87.4 million over five years starting in 2021-2022 and $18.6 million after that for the modernization of the federal procurement system and the diversification of the federal supplier base
- $38.2 million over five years and $7.9 million annually after that for improved trade control enforcement
- $21 million over three years for the accelerated reduction of trade barriers in Canada
- $4.6 million over four years starting in 2022-2023 and $0.6 million annually after that for the Financial Transactions and Reports Analysis Centre of Canada’s enforcement and compliance efforts relating to money laundering and terrorist financing
- $2.1 million for Innovation, Science and Economic Development Canada to work toward the implementation of a publicly available corporate beneficial ownership registry by 2025
The firm’s blog post titled “Canada’s Federal Budget 2021 and International Trade Implications” is authored by Darrel Pearson, partner and head of its international trade and investment practice; Sabrina Bandali, a partner focusing on international trade and investment law issues; George Reid, a partner in the areas of Canadian import and export, laws, regulations and policy and related international trade treaties; Jessica Horwitz, partner and international trade, customs and regulatory lawyer; and Ethan Gordon, associate.