Tobacco cost recovery: Annual charge calculation
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Calculation of the annual charge
The following formula is used to calculate the annual charge based on the domestic net sales revenue reported in the statement of sales and revenue (herein referred to as the “statement”):
A ÷ B × C
where
A is the designated manufacturer’s (herein referred to as the “manufacturer”) total net sales revenue for the previous fiscal year;
B is the aggregate of the total net sales revenue of all manufacturers for the previous fiscal year; and
C is the annual cost base for the previous fiscal year.
This means the annual charge depends on the annual cost base from the previous fiscal year and the market share of total domestic tobacco product net sales revenue for the same fiscal year.
Refer to Appendix 1 of the Tobacco Charges Regulations Guide for an example of an annual charge calculation.
Exception
If a manufacturer’s total net sales revenue is less than 0.001% of the total domestic net sales revenue of all manufacturers in a previous fiscal year, they do not have to pay the annual charge. Health Canada determines who is below this threshold from the submitted statements and will inform those manufacturers. Please note that all manufacturers must still submit the statement no later than April 30.
Estimate
If a manufacturer does not submit a statement for a specific fiscal year, or if Health Canada has reasonable grounds to believe the statement is incorrect or incomplete, Health Canada may estimate the manufacturer’s total net sales revenue using any relevant available information to calculate the annual charge and issue an invoice.
If an estimate was used to calculate the annual charge, it will be indicated on the invoice.
Corrections
If, based on new information, Health Canada has reasonable grounds to believe a correction is needed to a manufacturer’s previously calculated annual charge, Health Canada will use the new information to recalculate the annual charge. This could result in an additional amount owed or a credit. If other manufacturer’s market shares are affected by the recalculation, their charges could also be corrected for that previous fiscal year depending on the facts of each case.
Amounts owed or credits from a correction are combined with the next annual charge invoice. The invoice will note that a correction was made.
For more information, refer to the Tobacco Charges Regulations Guide.