Tax hike on tobacco could save 25,000 lives
TheStar.com – Opinion/Commentary – The tax hike on tobacco in the recent federal budget could save thousands of lives. But there’s still more to be done.
Feb 25 2014. By: Prabhat Jha
Finance Minister Jim Flaherty has put Canada in the medal hunt for the tobacco control Olympics. But if he wants the gold, he is going to have to do more.
Flaherty announced in his Feb. 11 budget that the federal excise tax for cigarettes would rise by about 40 cents per pack. With extra provincial taxes and the tobacco industry’s own profit markup, this means the street price of a pack would rise by about 50 to 60 cents, or around 5 per cent for an average pack currently priced at $10.
Canadian smokers consume more than 30 billion cigarettes a year. Smokers are sensitive to price changes, especially young smokers and lower-income Canadians. This modest 5-per-cent increase in street price will lead to about 50,000 Canadians quitting smoking. Since at least half of all smokers are killed by their addiction, at least 25,000 Canadians will be saved from an early death. This translates to about 1 per cent of Canada’s 5 million smokers quitting and another 1 per cent smoking fewer cigarettes. Canadians who quit smoking by age 40 (and preferably much earlier) will gain back nearly the full 10 years of life they would have lost had they continued to smoke.
Taxes are the single most effective intervention to curb smoking, as shown in studies from around the world. When French President Jacques Chirac tripled excise taxes and cigarettes doubled in price, consumption in France was cut in half within 15 years (a record time) and tax revenue from cigarettes doubled. Lung cancer rates in younger men and women are now falling in France.
A common complaint against tobacco control is that price increases sharply increase cigarette smuggling. These concerns, recently voiced by the Reason Foundation and others, are half-truths. Look back at the 1993 tax reduction in response to Big Tobacco’s media-savvy and well-organized smuggling across Canada’s native reserves. The net impact was that prices fell, youth smoking shot up a third and tax revenues declined.
Thankfully, the federal government corrected course some years later and raised taxes, and most importantly sued the tobacco industry for smuggling its own products. Big Tobacco quietly settled out of court in 2010 for a half-billion dollars in fines for its role in the 1993 fiasco.
In a clear rebuke to Big Tobacco, Flaherty’s budget has also added about $92 million for the RCMP to clamp down on smuggling. This policy will easily pay for itself. Research shows that spending more on tax-enforcement both reduces smuggling and raises more tax revenue.
Another strategy to help address the ills of tobacco use among Canada’s First Nations peoples comes from Manitoba Premier Greg Selinger. His novel idea is to remove the tax-free cigarette policy on native reserves and instead refund tobacco taxes raised to the community at the end of the year to be used for educational, health and other worthwhile efforts. This would reduce cigarette consumption and inject extra cash for positive social needs. Other provinces should follow his lead.
Could more be done? If Flaherty wants the gold medal for tobacco control then he should announce that every year for the next five years the street price per pack will rise by at least 10 per cent — or double his recent announcement. This will have the net impact of getting smokers to quit now, much as Canadians lock in house mortgages if they know interest rates will rise.
In addition, the federal government should introduce plain packaging as in Australia. This removes all brand imagery, which has been shown to make cigarettes less attractive to young smokers. The brand is printed only in small standard lettering below a pictorial warning.
Every year, tobacco still kills about 17,000 Canadians before age 70 and remains a leading cause of mortality in Canada, responsible for more deaths than obesity or binge alcohol drinking.
Death and taxes are inevitable, but they don’t need to be in that order. Canadian and provincial governments must carry the torch of higher tobacco taxes to save lives.
Dr. Prabhat Jha is director of the Centre for Global Health Research at St. Michael’s Hospital and a professor of disease control at the Dalla Lana School of Public Health at the University of Toronto. He recently published a major review on global tobacco use in the New England Journal of Medicine.
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