40% tax increase will drive consumers to illicit markets
OTTAWA, Feb. 12, 2014 /CNW/ - The Frontier Duty Free Association (FDFA),
which represents Canada's land border duty free shops, today expressed
great concern that the huge excise tax increase on tobacco products
will work counter to government revenue goals, health strategies and
Canada's economic interests.
"We understand and support the Government's need and desire for a
balanced budget and the goals of Canada's tobacco health strategy, but
a tax shock of this magnitude - which was brought in without any prior
consultation or warning - is a major blow to our stores," stated Abe
Taqtaq, FDFA President.
The 2014 Budget increased the federal excise tax on duty free cigarettes
from $15 per carton to $21.03 per carton - a 40% tax increase that was
"Our members are troubled about the unintended consequences of this tax
increase since it threatens to divert sales away from our members'
stores to the illicit market, which in turn jeopardizes both the
Government's revenue and public health goals," added Taqtaq.
In recent testimony to the House of Commons Justice Committee, a
representative from the Canada Border Services Agency called contraband
tobacco "a plague that is increasing." Estimates of the size of
Canada's contraband market have ranged from 25-33% in recent years,
fuelled by illegal manufacturing and sales on First Nations reserves.
FDFA members, which are all Canadian-owned stores, are also confused
regarding the origins of this tax increase since duty free stores were
originally established to help repatriate sales of products like
tobacco, and therefore bolster government revenues and Canadian
"Higher taxes in Canada drive more consumers to the U.S. to buy tobacco
products and, without effective means of enforcement at the border, in
turn result in more illicit product entering the country. That
translates into more lost revenue for government and creates a
competitive advantage for U.S. retailers over law abiding Canadian
retailers," warned Taqtaq.
The Frontier Duty Free Association (FDFA) is the industry association
representing the interests of Canada's duty free shops. Active
membership includes 28 Canadian Land Border Duty Free Shops, and
Associate Members consists of Canadian Airport and U.S. Land Border
Duty Free Shops, as well as trade supplier members and others
interested in the duty free industry.
SOURCE: Frontier Duty Free Associaton
For further information:
Laurie Karson, Executive Director, 613-233-1946