April 29th, 2014
Budget at a glance
OTTAWA The federal government is substantially hiking taxes on cigarettes, chewing tobacco and cigars a move that is sure to leave Canadian smokers fuming and could lead to an increase in contraband sales.
In a surprise announcement in Tuesday s budget, the Conservative government unveiled a major tax hike for smokers that will force them to dig deeper to light up.
Even so called duty free tobacco won t be spared from the tax hike and will now face the same federal excise taxes as smokes and manufactured tobacco for sale in the domestic market.
Related
- Federal budget Jim Flaherty promises surplus in 2015 but won t spend recklessly
- John Ivison Flaherty has done more than anyone to make life more affordable for Canada s most vulnerable citzens
The government expects to make approximately $3.3 billion in additional revenue from the tobacco tax hikesbetween 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 increase to $26.29 per 200 grams from the current $21.25. Also, the excise duty on cigars will increase to $22.89 per1,000 cigars, from the current $18.50, and the additional cigar duty will also increase.
Taxing tobacco products at a sustainable level is an important element of the government s health strategy to discourage smoking among Canadian
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 slapped 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 thedomestic 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 also announced 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.
The excise duty is slapped on tobacco products manufactured in Canada at the time manufacturers package them and on imported tobacco at the time of importation.
In an effort to ensure that the higher tobacco rates are applied consistently to all cigarettes, the government will impose roughly a two cent per cigarette tax on inventories held by manufacturers, importers, wholesalers and retailers.
The tobacco tax hike is certain to increase contraband tobacco in Canada, a point the government seems to acknowledge. The Conservatives also promised in the budget approximately $92 million over five years to help the RCMP combat contraband tobacco.
The money will partly go toward creating a Geospatial Intelligence and Automated Dispatch Centre and the deployment of various sensor devices to detect movement on the border in high risk areas from the Maine Quebec border to Oakville, Ont.
Gregory Thomas, federal director of the Canadian Taxpayers Federation, said the government could have a difficult time trying to collect the more than $3 billion it s expecting in additional revenues over the next five years.
The tobacco tax hike will dramatically increase the amount of contraband tobacco in Canada, he said, yet the government is only investing a relatively small amount in combatting the illegal tobacco market.
Let s see them try and collect it the expected additional revenue . They re demanding a whole lot of conscience on the part of smokers, Thomas said.
We all know that tobacco smuggling activity on our borders is a growing problem.
Budget at a glance
Jim Flaherty lowered his outlook for this year s deficit to $16.6 billion from the $17.9 billion estimate in his November fiscal update. For 2014 15, the shortfall forecast has been lowered to $2.9 billion from $5.5 billion. At the same time, the minister has raised his surplus target for 2015 16 to $6.4 billion from $3.7 billion. In the coming years, that surplus is projected to grow steadily before reaching $10.3 billion in2018 19, the government s current forecast horizon. It s been a long road back from the Great Recession to a balanced budget, he said.
What you need to know about the budget
- The cost of cigarettes is going up. A carton of 200 cigarettes will now carry about $21 in taxes, up from $17. The 24 per cent increase will apply to other tobacco products effective immediately. Oh, and duty free cigarette rates are going up as well.
- The government plans to cap domestic wireless roaming rates, arguing it will lower prices and encourage competition. That won t help you, though, if you go roaming in Mexico.
- The government says it intends to legislate an end to the price gap between goods sold in the United States, for instance, and the same goods sold for more in Canada. How will the Conservatives do this? Details will be announced in the coming months, the budget says.
- The government has built in a $3 billion cushion into its budget. If all the numbers line up as the government hopes, it could mean that the budget is balanced, even though the government said the budget wouldn t be balanced until next year.
- Overall, the federal budget this year is a very cautious document that doesn t include many frills, but does have spending slotted on an as needed basis not as much cash up front. That leaves the government free for a more robust document next year to set up the fall 2015 election.
- A $543 million fix for Montreal’s crumbling bridge infrastructure, including $165 million over two years for a new bridge to replace the aging Champlain Bridge.
- Suspended senators and MPs could soon find themselves cut off not only from their salaries, but also from getting closer to their pensions. The federal government signalled its intent to close a loophole that allows suspended parliamentarians to continue to accrue years of service towards their pensions. That currently applies to three senators suspended without pay Mike Duffy, Patrick Brazeau and Pamela Wallin.
What you may want to know from the budget
- The Governor General is paying more taxes The only person in the country exempted from customs tariffs will lose that privilege. Last year, the government decided it was time the Governor General also paid income taxes, and a pay raise to offset the loss in income.
- Olympic athletes will be able to count the money they ea
rn from amateur competitions when they look to calculate how much they can contribute to their RRSP. Bottom line Olympians will be able to set aside more for retirement unless all those gold medals may be worth a bit in the future. - Once approved, the government will have to provide an annual update on how various tax saving measures are actually performing so you know if you re really getting more money in your pocket.
- Beer drinkers rejoice! The government has proposed new regulations to remove red tape hurdles on labeling for new beers. That will help some brews get to market faster but not bring down the price of your favourite ale or lager. It also is looking to make it legal to bring beer and liquor across provincial borders, in the same way wine can be.
- Search and rescue volunteers are being offered a tax credit for their work. The credit will be available to anyone with at least 200 hours of service.
Are e-cigarettes a tobacco product? l.a. regulation called ‘short-sighted.’ (+video) – csmonitor.com
Supporters of the e cigarette industry are criticizing the cities new laws as hasty, saying there is a lack of conclusive evidence about the long term health effects of e cigarette use.
Lacking concrete scientific evidence, L.A. s proposal is premature and short sighted, and would trigger a serious public health disservice by keeping a less harmful product away from existing adult smokers, says Charles Connor, a consultant to ECIG, an industry trade group, as well as former president of the American Lung Association.
E cigarettes do not involve the exhalation of harmful smoke. They do not involve combustion, which has been recognized by the public health community for years as the real danger of a tobacco cigarette, he says, adding that the lesson is clear Different products require different regulations.
Providing a glimpse of just how contentious this issue is, however, Cynthia Hallett, executive director of Americans Nonsmokers Rights Foundation, an advocacy group based in Berkeley, Calif., is quick to rebut the industry position.
E cigarettes do not just emit harmless water vapor, she says. Secondhand e cigarette aerosol, which she says is incorrectly called vapor by the industry, contains nicotine, ultrafine particles and low levels of toxins that are known to cause cancer.
An e cigarette is essentially a nicotine delivery system, argues pharmacist Tammy Burns, manager of research and tobacco programs at Creighton University in Omaha, Neb., and therefore that makes it a tobacco product subject to regulation.
Such a regulation is in fact forthcoming, the FDA says, although the timing is uncertain.
According to the agency s website, electronic cigarettes are battery operated products that turn nicotine, which is highly addictive, into a vapor that is inhaled by the user.
The FDA intends to propose a regulation that would extend the agency s tobacco product authorities which currently only apply to cigarettes, cigarette tobacco, roll your own tobacco, and smokeless tobacco to other categories of tobacco products that meet the statutory definition of tobacco product, says an agency spokesperson.
The FDA is quick to note however, that further research is needed to assess the potential public health benefits and risks of electronic cigarettes and other novel tobacco products.
But even as the scientific inquiry continues, some regulation is warranted, suggest many researchers who have spent considerable time studying such issues as youth adoption of smoking and smoking cessation strategies.
The introduction of the e cigarette and how that is influencing adolescent smoking rates is not well known at this time, says Professor Elizabeth Dowdell, of Villanova University College of Nursing in Philadelphia.
E cigarettes can be viewed by this age group as cool or neat to use because the e cigarette is new and different, she says via e mail. Given the amount of current and past literature on adolescent cigarette smoking that links it to other risk taking behaviors, she says it is possible that e cigarettes will continue to be used in place of traditional cigarettes.
She cautions that the addictive nature of nicotine, which is in e cigarettes, is of concern especially in a young age group that is still developing physically and emotionally.
Sounding a similarly cautionary note about the perils of addiction is Deric Kenne, assistant professor in the College of Public Health at Kent State University in Ohio, who says via e mail that if e cigarettes are attractive to adolescents and young adults, we could see an increase in use among these populations. This will be especially important if it turns out that e cigarette use (because of the nicotine) transitions to regular tobacco cigarette use, which we know has numerous negative effects on the health of the public.
Preliminary results from survey data collected from more than 9,000 college students show that nearly 30 percent were currently using or had tried an e cigarette, notes Professor Kenne. Of those, 33.5 percent had used e cigarettes in an effort to stop smoking regular tobacco cigarettes and 27.8 percent had used e cigarettes because they could vape in areas where regular tobacco smoking was banned.
Many tobacco companies have begun moving into the electronic cigarette business.
Miguel Martin, a former executive at Altria, a tobacco company based in Richmond, Va., and now president of LOGIC, the nation s second largest manufacturer of electronic cigarettes, says his firm has no plans to fight the new laws in court.
He is quick to note that his company has voluntarily adopted a number of strategies that address the question of targeting youth removing flavored products (bubble gum and cotton candy, for instance), eschewing all celebrity and moving image advertisements that might appeal to a younger age, and adopting a strict policy of no marketing on the Internet, where age confirmation is difficult.
Martin says he was not invited to testify at the L.A. hearing, but will continue to work with regulatory agencies, because we would like to be able to market adult products to informed adults.
