The Conservative government plans to legislate lower prices for consumer goods as Tuesday's budget will go after international companies that charge Canadians more.
Finance Minister Jim Flaherty has previously signalled that the budget would address the price gap between goods in Canada or the United States, but it was not clear how it would be done.
Sources confirm that rather than further reducing tariffs, Tuesday's budget will announce plans to legislate against "country pricing" – a policy in which companies chose to charge higher prices based on factors that are unique to Canada, such as geography.
News of decision to legislate was first reported by the Canadian Press and CTV Monday evening. It has since been independently confirmed by The Globe.
A February, 2013, Senate committee report into the price gap between goods in Canada and the U.S. highlighted country pricing as a major source of higher prices.
The Retail Council of Canada told senators that some manufacturers in Canada charge Canadian retailers 10 per cent to 50 per cent more than U.S. retailers for identical products. The main reasons given for this was that "Canadians are used to paying more for products in Canada" and that higher prices subsidize the cost of higher costs of operating in Canada.
The committee ultimately made four recommendations, including calling for a comprehensive review of Canadian tariffs, but did not recommend legislating against country pricing.
"Price discrepancies for certain products between Canada and the United States are a complex issue," the report concluded. "They can arise at any point in the supply chain between the manufacturers and the retailers, and they are often the result of several factors."
The government's plan to tackle the price gap between goods in Canada and the U.S. was first signalled in October's Speech from the Throne.
The Globe reported at the time that the government was looking at amendments to the Competition Act to scrap what it considers to be the unfair penalization of Canadian consumers.