Wake Up and Cut the Taxes

   Ontario has a new plan to help it avoid bankruptcy. It is going to crack down on contraband cigarettes.

   The folks who run the province have announced their hope to bring in an additional $700 million in taxes by going after the underground economy, which includes the huge untaxed cigarette trade. In some parts of the province almost 50 per cent of cigarettes smoked are contraband.

   So the government plans to pour more money into enforcement to collect more taxes which will presumably help reduce the $12.5 billion budget deficit projected for fiscal 2014-15. Good luck with that, folks!

   Governments have been fighting contraband, with poor success,  since the first tax schemes were invented. Contraband trade develops when taxes are increased to the point that people can’t afford to pay them. 

   Governments and stop smoking groups insist that constantly upping tobacco taxes forces people to stop smoking. They are wrong and they refuse to accept their own statistics that show they are wrong.

   Ontario has more layers of contraband tobacco enforcement than Mama Rosa’s Mile High Lasagna. It keeps adding to them, at more and more cost. Yet the only significant reduction in contraband tobacco in the last 25 years has been through cutting tobacco taxes.

   In the early 1990s the contraband tobacco trade grew so large and so violent along the St. Lawrence River that the federal government and some provinces were forced to slash tobacco taxes. Ontario cut its cigarette excise tax by 67 per cent, Quebec by 71 per cent.

   With those cuts, legal cigarette sales increased by 50 per cent. Seizures of untaxed cigarettes plunged by more than 90 per cent. 

   So how much did cutting taxes increase the smoking rate as predicted by politicians and anti-smoking groups?

   In 1985, roughly 35 per cent of Canadians smoked. By the early 1990s when contraband flooded the country, only 30 per cent smoked. The smoking rate declined even more after the 1990s tax cut. In fact the decline was greater than in the years following 2002 when taxes were raised to previous levels and beyond.

   Today, the smoking rate among Canadians is well below 20 per cent.

   Ontario should not spend more tax dollars on police and revenue agents to stop addicted senior citizens driving away from a smoke shack with a carton of untaxed cigarettes. Higher taxes and more enforcement don’t significantly lower smoking rates. People kick the habit through education and programs designed to fight addiction.

   Ontario is two-faced when it comes to cigarettes. It is addicted to tobacco taxation. No matter how much politicians talk about a Smoke-Free Ontario, they can’t live without cigarette taxes.

   In 2011, Ontario took in $1.16 billion in tobacco taxes. The same year governments across Canada raked in $7.5 billion in tobacco taxation.

   Slowly reducing tobacco taxes will help wean governments from their addiction and prepare them for the day when no one smokes and all that tobacco revenue is gone.

   More on this subject is available in Smoke Signals: The Native Takeback of North America’s Tobacco Industry @ http://www.amazon.ca/Smoke-Signals-Takeback-Americas-Industry/dp/1459706404

See My Minden Times column - http://mindentimes.ca/?p=5649