MONTREAL, Oct. 27, 2015 /CNW Telbec/ - While the Province of Alberta may believe that raising taxes on cigarettes will help its ailing budget, indeed tobacco taxes have increased by $10 a carton over the past seven months, organized crime is far more likely to be the beneficiary of this measure. According to Imperial Tobacco Canada, the country's largest legal tobacco manufacturer, the Alberta government is creating a fertile environment for the contraband market and a perfect storm is brewing in the province for the illegal tobacco trade.
The most recent tobacco tax increase announced today in Alberta's 2015 budget of $5 per carton, is the second provincial tobacco tax increase in less than a year, which were preceded by an excise tax increase at the federal level in 2014.
"Our company understands that tobacco taxation is an important revenue stream for governments," said Eric Gagnon, Head of External and Corporate Affairs for Imperial Tobacco Canada. "But it is important to be cautious and aware of the fact that these tax 'shocks' further increase the price gap between legal and illegal products, creating a larger incentive for consumers to turn to the contraband market."
Today, the major centers of the illegal tobacco trade in Canada are Quebec and Ontario, where contraband represents up to one in every three cigarettes. Surveys conducted by the Western Convenience Store Association in 2008 and 2010 showed illegal tobacco levels in Alberta at 1.5 per cent or lower, however rates have been approximately 10 per cent for the last two years, as assessed by the WCSA's most recent study released earlier this month.
"The recent actions of the Alberta government are very surprising and may well be counterproductive" said Gagnon. "It banned menthol tobacco products and raised tobacco taxes to increase revenue, two measures that will not deter people from smoking, but will instead drive them to the illegal market.".
"By over-taxing the legal tobacco trade, governments put their own public health and financial objectives at risk and promote the growth of a thriving criminal industry," he says.
SOURCE Imperial Tobacco Canada
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