April 5, 2001

Today, the Government announced a comprehensive strategy to improve the health of Canadians by reducing tobacco use. The strategy consists of:

Increased funding for tobacco control programs -- with a special focus on reaching out to young people and fighting the marketing practices of the tobacco industry;

Tobacco tax increases to discourage smoking; and,

A new tobacco tax structure designed to break the link between tobacco prices and smuggling.

Health Canada will invest $480 million in a comprehensive, integrated and sustained tobacco control strategy over the next five years.

Approximately $210 million of that total will be directed towards anti-tobacco mass media campaigns, with a particular emphasis on youth and other high-risk groups.

To gauge the success of the strategy, the Government has set out clear, measurable 10-year smoking reduction targets. They are to:

• Reduce the number of people who smoke from 25 to 20 per cent of the population.
• Decrease the number of cigarettes sold by 30 per cent.
• Increase retailer compliance with tobacco-sales-to-youth laws to 80 per cent

As of April 6, 2001, a combined federal-provincial tax increase of $4 per carton of cigarettes is proposed to take effect in New Brunswick, Prince Edward Island, Nova Scotia, Ontario and Quebec.

An excise tax increase of $1 per 200 grams of fine-cut tobacco and $1 per carton of tobacco sticks will similarly take effect on the same date.

Effective April 6, 2001, the surtax on the profits of tobacco manufacturers will increase to 50 per cent of corporate income tax payable from the current rate of 40 per cent.

The new tobacco tax structure is designed to reduce the incentive to smuggle Canadian-produced tobacco products back into Canada from export markets – the main source of contraband in the past.

It is proposed that on April 6, 2001, a two-tiered export tax on Canadian tobacco products will take effect -- with a $10-per-carton rate applying to exports up to 1.5 per cent of a tobacco manufacturer's annual production and a $22-per-carton rate on exports that exceed the 1.5-per-cent threshold.

It is proposed that on April 6, 2001, a tax will be applied on Canadian tobacco products delivered to duty-free shops in Canada and abroad, as well as on tobacco products sold as ships' stores – that is, for inventory sold to airlines and cruise ships.

It is also proposed that on April 6, 2001, a tax will be applied on imported tobacco products delivered to Canadian duty-free shops.

Effective October 1, 2001, the traveller's exemption will be amended to ensure that tax is imposed on tobacco products imported by Canadian residents returning to Canada.

To help ensure that the tax measures are effective and to determine the size and timing of future tax increases, $55 million over 5 years will be provided to:

Canada Customs and Revenue Agency ($32.7 million over five years);

The Royal Canadian Mounted Police ($9.5 million over five years);

The Department of Justice Canada ($9.6 million over five years); and,

The Department of the Solicitor General ( $3.2 million over five years).