Wednesday, April 7, 2010

Overly High Cigarette Taxation is Showing Its Costs...

“The government has taxed the product out of the market.” said the Senior Vice President of the Canadian Convenience Store Association (CCSA), and he couldn't be anymore on the mark.

With the tax rates on Cigarettes constantly skyrocketing, should it be any surprise that smokers have turned to black market sources to get their cigarettes? I'm talking mainly about Native cigarettes, as I'm sure you already assumed...

Yes, even I've been touched by the allure of a bag of 200 cigarettes for $10... Many people I know have turned to these "contraband cigarettes" simply because the cost of "legal" cigarettes is just too much, especially in today's economy... And can I blame them? No, I can't.

I however have yet to succumb to this golden offer, simply because I love my Du Maurier Special Mild King Size far too much... But, if the taxes keep going up the way they are, I have to admit that even I will eventually begin to consider switching...

I came across this story today in the Toronto Sun:

Contraband tobacco, credit card fees hit convenience stores

About 10% of Canada’s convenience stores closed up shop in 2009, hurt by sales of contraband tobacco and high credit card transaction fees, the trade body representing the industry (CCSA) said Tuesday.

High credit card fees wipe about $200 million a year off profits at convenience stores, while contraband costs $260 million. The two combined hit annual sales by $2.6 billion.

The association estimates that governments are losing more than $1.5 billion a year in lost tax revenue from contraband tobacco.

According to figures on the CCSA website, 22% of all cigarettes purchased in the country are sold illegally, with almost one-third of those purchased on First Nations reserves.

Part of the problem is high taxation on cigarettes, which encourages consumers to turn to illegal products, Gadbois said.

“The government has taxed the product out of the market.”
But the government already knew that this could happen, as this is exactly what happened in the early 1990s when they tried to do the exact same thing...

As per a factsheet provided by the (Factsheet: Tobacco Taxation):

Canada has a long history of implementing tax increases and decreases. Between 1982 and 1992, the Canadian government increased tobacco taxes by 500%, which caused a significant 40% decline in [legal] per capita consumption of cigarettes. However, in response to an increase in illegal cigarette smuggling (mainly from the U.S.), in 1994 the Government of Canada drastically reduced tobacco taxes in an attempt to control the smuggling.
These days the actual "smuggling" isn't really as much of an issue, as the cigarettes are made here in Canada, and as such they just need to make it out of the Native Reservations and into our cities. And granted, we do hear about trucks being pulled over and found with Millions of Dollars worth of contraband cigarettes every month or so, but there are still countless other trucks that do get through, as evidenced by high percentage of Native Cigarettes being purchased by smokers especially here in Ontario.

Anyway, these numbers are only going to rise, and slowly the government will have to review its approach to this issue. And the only way that that's going to happen is by eventual lost tax revenue, and unfortunately by the closing of small businesses who are the main victims of this proven-failure of a tactic to supposedly get people to stop smoking.

For me personally, I've tried Native smokes before and I'm not a big fan. I find that I don't like the taste as much, and they actually leave me feeling a bit nauseous -if you can believe that. It may all be mental though, as I question the quality of these illegal smokes and wonder if the lack of government regulation on them will result in them being far worse than our legal brands. I've read stories recently that have said things like, "The RCMP have found insect eggs, mould, even human feces inside these cigarettes." (Toronto Sun Article: Burned by illegal butts) and though that could be complete propaganda crap, still I don't disagree with the notion that it could be possible...

I also question the actual usefulness of the filters that they put in those smokes... I'm assuming -and I could be completely wrong about this- that the Government has some kind of regulations in regards to the filtering of cigarettes, and I just don't know for certain if these Native smokes follow any kind of standards in that regard whatsoever...

Everyone I talk to about it tells me that they'll kill you anyway, and I guess I have to agree with that... But I'll still smoke my Special Milds regardless until the day that they become just too unaffordable for me. And who knows, by that time I may have quit... Don’t quote me on that… I’ll just say “we'll see”...

Anyway, I would love to hear your opinion on Native smokes… Have you tried them? If so, what did you think? Do they taste better or worse than legal brands? How much did you pay for them? Do you know anything about the quality of the smokes, and whether they follow any kind of standards?

Any information that you can provide would be a great resource for other readers.


(Image: by SuperFantastic on flickr


Blogger said...

Did you know you can create short urls with BCVC and get cash from every visitor to your shortened links.

Blogger said...

I got my first electronic cigarette kit on VistaVapors, and I think its the best kit.