The cost of smoking
Last Updated February 15, 2007
Increased taxes on cigarettes have been called the best smoking cessation program in the world.
In Canada, between 63 and 79 per cent of the price of a package of cigarettes is tax. In New York, by comparison, the tax on cigarettes is 38 per cent.
Ontario which had the lowest-priced cigarettes in Canada, added $5 a carton in June 2002 in an attempt to deter smoking. But they may have succeeded in pushing some smokers to seek out cheaper alternatives and bootleggers to claim a larger part of the cigarette market.
Sources: Finance Dept., Provincial Govt's, Finance Canada
On February 28, 2003, major Canadian tobacco company JTI-MacDonald Corp. and some of its former executives were charged with fraud after an investigation into alleged smuggling of cigarettes in the 1990s.
RCMP laid charges against the company, accusing it of supplying the Canadian black market with Canadian-blend tobacco products manufactured in Canada and Puerto Rico.
Police laid six counts of fraud against JTI-MacDonald Corp., formerly known as RJR-MacDonald, Inc., and several of its subsidiaries, alleging the companies conspired to defraud the governments of Canada, Ontario and Quebec out of $1.2 billion in tax revenue between 1991 and 1996.
Twenty-three per cent of Canadians over 15 years old were smoking in June of 2001... that's 5.7 million people.
Despite the availability of some cheaper cigarettes, the U.S. surgeon general reported that higher cigarette prices result in lower rates of consumption. A 10 per cent price increase should result in a two to three per cent drop in the number of smokers. The report also states that fewer young people will be likely to smoke if cigarette prices are higher, and more people will be driven to quit.
The Canadian government has initiated several programs to try to lower rates of smoking in Canada. These include:
- Informing Canadians about the health effects of smoking and second-hand smoke;
- Providing programs to support those who choose to quit smoking;
- Reducing access to tobacco products by minors;
- Deterring smokers by increasing product pricing through taxation;
- Placing restrictions on where smoking may occur;
- Restricting tobacco product advertising and promotion;
- Encouraging Canadians to support smoke-free living;
- Requiring tobacco companies to release information on the composition of cigarettes and cigarette smoke; and
- British Columbia challenged the tobacco industry to recover the costs due to tobacco related illnesses.
It wants to increase taxes on cigarettes so that they are closer to covering the social costs incurred from smoking.
They estimate that, in Canada, the societal costs attributable to smoking for 1993 were approximately $11 billion, of which $3 billion was spent on direct health care costs such as hospitalization and physician time. The remaining $8 billion was due to lost productivity. In comparison, it is estimated that in 1993/94, revenue from taxes on cigarettes totalled $2.6 billion.
The argument around taxation and smoking is, and always has been, does the good outweigh the bad? Will the health and economic gains from taxation pay for the negative effects of the act of smoking? Well, more taxes might pay the governments bills, but will increased taxation be enough to make people quit?