May 7th, 2014
Federal budget: tax hikes on cigarettes leave smokers digging deeper
OTTAWA The federal government is substantially hiking taxes on cigarettes, chewing tobacco and cigars a move that is sure to leave Canadian smokers doing a slow burn and raises the spectre of increased contraband sales.
Even so called duty free tobacco won t be spared the tax hike announced in Tuesday s budget They ll now face the same federal excise taxes as domestic smokes and manufactured tobacco.
The government expects to take in an extra $3.3 billion in revenue from the tobacco tax hikes between now and the 2018 19 fiscal year (including $685 million in the 2014 15 fiscal year starting April 1).
The move is sure to spark some ill will towards a government that has promised it would not increase taxes on Canadians, as Ottawa looks to balance the books in 2015, partly on the backs of smokers.
The excise duty on a pack of cigarettes will increase by about $4 per carton of 200 cigarettes, to $21.03 from the current $17, an increase of about 24 per cent. The government says the federal duty on cigarettes has effectively not increased since 2002 and that the hike accounts for inflation.
A corresponding tax hike will also be applied to tobacco sticks, with the duty also increasing to $21.03 per 200 tobacco sticks from the current $17.
The federal excise duty on manufactured tobacco such as chewing tobacco or fine cut tobacco for roll your own cigarettes will rise to $26.29 per 200 grams from the current $21.25. The excise duty on cigars will go to $22.89 per 1,000 cigars, from the current $18.50, and the additional cigar duty will also increase.
The tax hikes take effect Feb. 12.
Taxing tobacco products at a sustainable level is an important element of the government s health strategy to discourage smoking among Canadians, the budget says.
The government is also increasing the duty free excise tax on all Canadian made cigarettes, tobacco sticks and manufactured tobacco for sale in domestic and foreign duty free shops, as well as on imports of these products for sale in Canadian duty free shops.
Currently, a carton of 200 cigarettes receives a $2 excise duty preference compared to a carton in the domestic market $15 per carton compared to $17. The budget changes will see the duty free rate for cigarettes increase to $21.03 per carton of 200 cigarettes, in line with the changes for smokes available in the domestic market.
The duty free rate on tobacco sticks and manufactured tobacco will also increase to the same rate as those in the domestic market to $21.03 per 200 tobacco sticks and $26.29 per 200 grams of manufactured tobacco.
And the tobacco tax hike will continue into the future The government announced that the higher excise taxes will be indexed to inflation and automatically adjusted every five years. The first inflationary adjustment, beyond the higher rates announced Tuesday, will be effective Dec. 1, 2019.
Pamela Fralick, president of the Canadian Cancer Society, said the tax hikes will save lives. Tobacco prices are an important factor in sales, especially with young Canadians, she said.
