Annual lists 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

Ottawa, November 28, 1996
1996-086

Statement by the Honourable Paul Martin, P.C., M.P., Minister of Finance, Announcing Changes to the Tax Treatment of Tobacco Products

Ottawa, Ontario
November 28, 1996

Delivered text is official version

I am pleased to announce that the Government of Canada is taking the next step in the restoration of federal excise taxes on tobacco products. The Minister of National Revenue, the Solicitor General and I agree that now is the time to increase the excise tax on these products.

The measures I am announcing today include:

• a 70-cent-per-carton increase in the federal excise tax rates for cigarettes sold in Ontario, Quebec, New Brunswick, and Nova Scotia;

• an agreement with these four provinces for an equivalent increase in provincial tax rates;

• an extension of the surtax on the profits of tobacco manufacturers at its current rate of 40 per cent for an additional three-year period;

• changes to the export tax on tobacco products sold by Canadian tobacco manufacturers to foreign duty-free operators;

• a 50-per-cent reduction in the amount of fine cut tobacco and tobacco sticks permitted to enter Canada under personal exemptions; and

• continued funding of federal enforcement agencies to ensure a strong and effective anti-smuggling presence in all parts of the country.

The decision to reduce tobacco taxes in 1994 was not an easy one. But something had to be done to meet the increasingly violent trade in contraband goods. We met this challenge head-on with the Prime Minister's introduction of the comprehensive National Action Plan on Smuggling.

The fact that we are now in a position to gradually increase federal excise tax rates on tobacco products is a testament to the success of the National Action Plan. My colleague, the Solicitor General will tell you that we have broken the backs of many organized tobacco smuggling rings in Canada. In fact, enforcement agencies report that they have already disrupted over 120 established smuggling networks, and are continuing to target others as they emerge.

We will not abandon that fight, at a time when our investment is clearly paying off. We recognize that crime prevention takes time to reach maximum effectiveness. The R.C.M.P. and Canada Customs have done an exceptional job of dismantling these criminal organizations. We want to ensure that the resources are there to finish the job.

The tough decisions necessary to increase tobacco taxes have been undertaken in conjunction with our provincial counterparts. We have worked closely with the governments of Ontario, Quebec and the Maritime provinces, recognizing that the cost of smuggling and crime is not just borne by any one government, but by all Canadians. In this regard, I am pleased that the governments of Ontario, Quebec, Nova Scotia, and New Brunswick will today be undertaking equivalent increases in their provincial tobacco tax rates.

Even with the increases proposed today, tobacco taxes remain lower than in 1994. The profits of tobacco companies, however, continue at a high level. To maintain federal revenues from the tobacco sector, we are amending the Income Tax Act to extend the 40-per-cent surtax on tobacco manufacturers for an additional three-year period.

Of course, we are not making these tax changes in a vacuum. I have mentioned the successful work being carried out by my colleagues, the Solicitor General and the Minister of National Revenue, in reducing criminal activity. Further measures on tobacco control legislation will be announced today by the Minister of Health which will protect the health of all Canadians, especially young people.

Our approach to taxation and enforcement is working. Our measured steps are leading to real progress. We identified a shared federal-provincial problem and immediately got to work on a co-operative solution. As of midnight tonight, we are one step closer to the long-term restoration of uniform federal tobacco tax rates across the country -- a process that will lead to a healthier and safer Canada.