Canada increases tobacco taxes to aid its smoking fight
OTTAWA -- Canada, already hailing itself as the world's most anti-smoking nation, Thursday said it would increase tobacco taxes to raise C$215 million ($137 million U.S.) a year for a new strategy to make young and old butt out.
Finance Minister Paul Martin said cigarette taxes would be raised in five eastern provinces by C$4 a carton -- or about 50 Canadian cents per pack. The surtax on tobacco company's profits would be increased to 50 percent from 40 percent.
All the measures went into effect Friday, and are aimed mainly at stopping young people from smoking.
"By increasing taxes sharply and introducing a new tax structure for tobacco, we are taking important steps now and positioning ourselves to take further steps as need be," he told a news conference.
Canada, where the fight against smoking is somewhat of a national passion, has in the past decade made it increasingly hard for citizens to partake of the weed.
All government and many private buildings, flights, schools ban smoking and it is increasingly difficult to smoke in restaurants and bars. It is illegal for stores to sell tobacco to minors.
But smoking, particularly among young people and women, has increased despite such measures -- which also include the prohibition of tobacco companies from sponsoring major public events and strict controls on tobacco advertising.
"The most effective public policy is for governments to join hands with communities in a broad, integrated and sustained strategy to change attitudes and to influence behavior, and to thereby reduce the toll on the health of Canadians," Health Minister Allan Rock said.
Rock said Ottawa would invest more than C$480 million in a comprehensive tobacco control strategy over the next five years.
Martin also announced a new export tax on Canadian tobacco products, with a C$10-a-carton rate applying to exports up to 1.5 percent of a tobacco manufacturer's annual production and a C$22-a-carton rate on exports exceeding the 1.5 percent threshold. A carton holds 200 cigarettes.
Solicitor-General Lawrence MacAulay said the new taxes were also designed to combat smuggling of tobacco products into Canada.
Canada cut its tobacco taxes sharply in February 1994 to counter a wave of smuggling across the U.S. Canada border. Prices have climbed upward since then, mainly through successive tax increases.
John McDonald, spokesman for Rothmans Benson & Hedges Inc., Canada's No. 2 tobacco manufacturer, said the C$4 tax could lead to increased contraband with people illegally bringing tobacco in from outside the country to avoid the tax.
"It's a step in that direction, for sure," McDonald said, adding that the tax could prompt smokers to seek out cheaper brands on the Internet.
Michel Descoteaux, public affairs director for Imperial Tobacco in Montreal, expressed relief that the tax rate had not been greater.
"People were recommending (a tax increase of) C$10 a carton (and) that would have been totally irresponsible. It would have been a recipe for rekindling smuggling," he said.
Canada late last year ordered tobacco manufacturers to attach graphic health-warning labels on cigarette packages featuring messages and pictures of all of the health problems which can result from tobacco use.
The new taxes will also apply to sales of Canadian tobacco products to duty-free shops located domestically and abroad. Taxes will also increase on imported tobacco and products.