Registration
SOR/2008-36 February 7, 2008

EXCISE TAX ACT

Regulations Amending the Interest Rates (Excise Tax Act) Regulations

P.C. 2008-0246 February 7, 2008

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, pursuant to subsections 59(3.1) (see footnote a) and (3.4) (see footnote b) and section 277 (see footnote c) of the Excise Tax Act, hereby makes the annexed Regulations Amending the Interest Rates (Excise Tax Act) Regulations.

REGULATIONS AMENDING THE INTEREST RATES (EXCISE TAX ACT) REGULATIONS

AMENDMENTS

1. Paragraph 2(c) of the Interest Rates (Excise Tax Act) Regulations (see footnote 1) is replaced by the following:

(c) in any other case, the sum of the basic rate in respect of the particular quarter and 4%.

2. Section 3 of the Regulations is repealed.

COMING INTO FORCE

3. Sections 1 and 2 are deemed to have come into force on April 1, 2007.

REGULATORY IMPACT
ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Description

Part IX of the Excise Tax Act (the Act) imposes the Goods and Services Tax and the Harmonized Sales Tax (GST/HST) on domestic supplies and importations of goods and services in Canada. Failure to remit an amount payable to the Receiver General for Canada as and when required under Part IX or where the Minister of National Revenue owes an amount to a person, results in the imposition of compound interest payable at the “prescribed rate” in order to maintain the time-value of the amount owed.

The Government of Canada has, for a number of years, worked on an initiative referred to as Standardized Accounting, which aims to simplify tax compliance for businesses by harmonizing various administrative, interest and penalty provisions of the Act, the Income Tax Act, the Excise Act, 2001, and the Air Travellers Security Charge Act.

Changes to the interest rate and penalty provisions applicable to Part IX of the Act were announced in Budget 2006, tabled in the House of Commons on May 2, 2006. These changes align the GST/HST portion of the Act with the non-GST/HST portion as well as with the other statutes under the Standardized Accounting initiative.

At the time of Budget 2006, there were two fundamental differences between the interest and penalty provisions of Part IX of the Act and the non-GST/HST portion of the Act and the other statutes:

– the GST/HST portion of the Act imposed a 6% penalty per year on amounts owed by a person to the Receiver General while, in similar circumstances, the other statutes imposed none; and

– compared to the GST/HST portion of the Act, the prescribed interest rate of the other statutes was 4% higher in the case of amounts owed by a person to the Receiver General, and 2% higher in the case of amounts owed by the Minister of National Revenue to a person.

The Budget Implementation Act, 2006, which received Royal Assent on June 22, 2006, repealed the 6% penalty payable on amounts owed by a person to the Receiver General under Part IX of the Act, effective April 1, 2007. The amendment to the Interest Rates (Excise Tax Act) Regulations (the Regulations) complements the legislative changes in the Budget Implementation Act, 2006, by harmonizing the prescribed rates of interest for GST/HST purposes with those of the other statutes under the Standardized Accounting initiative.

Under the amended Regulations, the rates of interest are the same for the purposes of the GST/HST and non-GST/HST portion of the Act as well as with the other statutes under the Standardized Accounting initiative. The prescribed interest rate for amounts owed to Her Majesty is the basic rate plus 4%. The prescribed rate for amounts payable by the Minister is the basic rate plus 2%. The prescribed rate in any other case provided in the Act is the basic rate plus 4%. The basic rate of interest is established quarterly. The basic interest rate is the simple arithmetic mean, expressed as a percentage per year and rounded to the next higher whole percentage where the mean is not a whole percentage, of all amounts each of which is the average equivalent yield, expressed as a percentage per year, of the Government of Canada 90-day Treasury Bills sold at auction during the first month of the preceding quarter.

The Regulations came into force on April 1, 2007.

Alternatives

No alternatives to the Regulations were considered since the Act specifically provides for the rate of interest to be prescribed by regulation.

Benefits and c osts

Harmonizing the prescribed interest rates under Part IX of the Act with the other statutes under the Standardized Accounting initiative will simplify tax compliance for businesses.

The effect of harmonizing these interest rates must be assessed in light of the global cost of the Standardized Accounting package of measures announced as part of Budget 2006. Based on reasonable estimates of taxpayer compliance, the overall determination is that the package of measures is revenue neutral.

Strategic environmental assessment

These amendments are not expected to have a significant impact on the environment.

Consultation

The proposed changes to the rate of interest included in the Standardized Accounting initiative were announced in the federal budget tabled in the House of Commons on May 2, 2006. No written submissions or comments were received with respect to this announcement.

On November 10, 2007, the proposed amendments were pre-published in Part I of the Canada Gazette. No comments were received during the ensuing consultation period, and no modifications were made as a result of this pre-publication.

Compliance and e nforcement

The Act provides the necessary compliance and enforcement mechanisms for these Regulations. The Canada Revenue Agency is responsible for the administration and enforcement of the Act.

Contact s

Geoffrey Macmillan
Sales Tax Division
Department of Finance
L’Esplanade Laurier
140 O’Connor Street
Ottawa, Ontario
K1A 0G5
Telephone: 613-943-0184

General Operations and Border Issues
Excise and GST/HST Rulings Directorate
Canada Revenue Agency
Place de Ville, Tower A, 16th Floor
Ottawa, Ontario
K1A 0L5
Telephone: 613-954-7959

Footnote a
 R.S., c. 15 (1st Supp.), s.23(2)

Footnote b
 S.C. 2003, c. 15, s. 96

Footnote c
 S.C. 1993, c. 27, s. 125

Footnote 1
 SOR/2006-230

NOTICE:
The format of the electronic version of this issue of the Canada Gazette was modified in order to be compatible with extensible hypertext markup language (XHTML 1.0 Strict).