July 25, 2003

Alberta set to lower tax rate on cigars

Edmonton … Alberta Revenue Minister Greg Melchin announced today that effective August 1, 2003, the Government of Alberta will reduce the provincial tobacco tax rate on cigars.

At 12:01 a.m. August 1, the tax on cigars will be reduced to 95 per cent of the taxable price, with a minimum tax of 15 cents and a maximum tax of $5 per cigar. These changes will bring the tax in-line with other provinces that followed Alberta’s lead and increased their tax rates on cigarettes, but did not increase their tax rate on cigars. As a result, Alberta’s cigar tax rate is much higher than those of neighbouring provinces, which is having an adverse effect on Alberta retailers.

Prior to the 2002 increase, the tax rate was 80 per cent of the retail price, with a minimum of 15 cents and a maximum of $2.50 per cigar. The rate announced today still represents an increase from 2002.

Alberta’s tax rates on all tobacco products, including cigars, were increased in 2002 as part of the government’s tobacco reduction strategy. The tax rate increases led to reductions of 24.4 per cent in cigarette sales, 8.1 per cent in loose tobacco sales, 3.6 per cent in cigar sales, and 2.3 per cent in custom cut tobacco (2002-03 final numbers).

As of August 1, 2003

Note: British Columbia and Manitoba charge cigar tax based on the suggested retail price set by the manufacturer or importer, which is their selling price (MSP) plus 22 per cent. Alberta bases its cigar tax rate on the actual retail selling price when the manufacturer or importer is also the retailer, or the manufacturer or importer’s selling price plus 30 per cent. Saskatchewan bases it on the wholesaler’s purchase price plus 60 per cent. In addition, Saskatchewan charges sales tax of 6 per cent and Manitoba charges sales tax of 7 per cent.

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For media inquiries, please contact:

Cathy Housdorff
Director of Communications
Alberta Revenue
(780) 427-5364