Tax hikes, denial and inaction: Provinces put out the welcome mat to illegal tobacco traffickers

    Canada's illegal tobacco industry gets a boost from provincial

    MONTREAL, April 15 /CNW Telbec/ - Imperial Tobacco Canada is shocked by
the latest in a series of counterproductive provincial and territorial
indirect and direct tax increases on tobacco from the governments of Alberta,
Ontario, Manitoba, British Columbia, the Northwest Territories and Quebec that
make these provinces even more attractive for Canada's flourishing illegal
tobacco industry.
    "In times of economic crisis, increasing tobacco taxes may seem to be an
easy way to mitigate planned government deficits," said Richard Hodgson, chief
financial officer of Imperial Tobacco Canada. "But, for the majority of the
provinces, it serves only to fuel the growth of illegal tobacco sales. The
reality, in the long-term, is likely to be larger deficits for some provinces
due to higher levels of uncollected and delinquent tobacco tax."
    On April 7, just as the federal government was announcing measures to
combat illegal tobacco sales, the Government of Alberta announced that it
would increase the tax on a carton of 200 cigarettes by $3.00. Manitoba,
British Columbia and the Northwest Territories have also announced tobacco tax
increases in their respective provincial and territorial budgets. In line with
its Quebec Sales Tax rate change, Quebec announced a nominal tobacco tax
increase in 2011 in its 2009 budget.
    In its recent budget, the Government of Ontario announced a new
harmonized tax structure that would apply equally to tobacco products.
Currently, tobacco products are not subject to Ontario's Retail Sales Tax
(RST), as the RST was combined with the Ontario Tobacco Tax in 2002. If
nothing is done to keep existing tobacco prices unchanged for consumers there
will be an increase of between $5 and $6 to the price of a carton of
    Many of these tax increases will not have the desired effect and will
undermine efforts to stop the growth of illegal tobacco sales.
    For example, in Ontario the excessive tax increases from 2002 to 2006
have led to an explosion of illegal tobacco sales (48 per cent of tobacco
purchased in Ontario is illegal), an increase in the number of smokers
(according to Health Canada's Canadian Tobacco Use Monitoring Survey), and a
three year track record of ever declining government tobacco tax revenues.
    "Reassuringly, the federal government and the Government of New Brunswick
have demonstrated that they do not want to make a bad situation worse and have
recognized that short-term tobacco tax increases without effective enforcement
will not result in long-term increased government revenue," continued Mr.
Hodgson. "An eight per cent increase in tobacco prices is likely to fuel the
already out-of-control illegal tobacco market in the province."
    Imperial Tobacco Canada is encouraged that the Honourable Jean-Pierre
Blackburn, Minister of Revenue, recognized the problem on April 7 in Montreal
and suggested measures to address this crisis. Imperial Tobacco Canada is
optimistic that the sale of illegal tobacco will become a priority item for
the federal government. The company calls on all levels of government to work
together to implement effective and long-term solutions.
    The sale of illegal tobacco has reached crisis levels in Canada. One in
three cigarettes purchased in Canada is illegal. The numbers reach even more
alarming levels in Ontario and Quebec where the problem is most acute.
Forty-eight per cent of all cigarettes purchased in Ontario is illegal, while
the figure for Quebec is 40 per cent.
    Further information on Imperial Tobacco Canada is available on the
Internet at:

For further information:

For further information: Media Contact: Catherine Doyle, Manager,
Corporate Communications, (514) 932-6161, ext. 2113

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