September 25, 2002

I oppose federal/ provincial tobacco tax hikes

As an MPP for tobacco country, I have always opposed federal/provincial tobacco tax hikes - they take us down the road to the days of smuggling, theft and the unregulated use of the early 1990's.   And instead of increased tobacco taxes discouraging young people from smoking - as the anti's often argue - they actually make it easier for our children to find cheap "smokes" from the trunk of a car, no proof of age required.

One thing must be made clear about federal / provincial taxation: the federal government does not require Ontario's permission to raise or lower tobacco taxes.   Any decision to change federal tobacco tax can rest unilaterally with the federal government.

What was not reported at the time of the Ontario budget last week was that the federal government had already made a decision to jack up tobacco taxes by $7.00 per carton that same day - $3.50 federal and $3.50 provincial. Thus the unilateral decision of Ontario to increase tobacco taxes amounted to something in the order of $1.50 - that's $1.50 of the $9.00 increase including federal GST.

Since 1994, when tobacco taxes were decreased in response to smuggling, federal tobacco taxes have increased seven times: in 1995, 1996, 1998, 1999, twice in 2001 and June 2002. As Ontario's tax on tobacco was linked directly to the federal tax rate in the 1996 Ontario Budget, the last six increases were automatically matched.

Over the past weeks I have joined the industry to fight these tax proposals. The anti-tobacco crowd was originally looking for a whopping increase in the range of $15 a carton.   The fact that through meetings, lobbying and speaking with my fellow MPP's we were able to wrestle the hike down to its current level should not be lost.   We still have some of the cheapest cigarettes in North America, and we cannot be complacent - the anti's are still not satisfied.

Federal/provincial taxes are now higher than in the early 1990's.   The consumer is, once again, looking for a "cheaper" product - and now it could be unregulated foreign-grown tobacco.

To counteract the threat of tobacco smuggling, the recent Ontario budget exempts tobacco products under the Retail Sales Tax Act and puts it under the Tobacco Tax Act.

The Ontario Government recognizes that tobacco is a legal crop -an important crop that generates significant employment.   The Ministry of Agriculture and Food supports tobacco production as it does other farm operations.

Last Spring I lobbied hard and our government delivered a $20 million payment to the Tobacco Marketing Board to help with the required conversion of tobacco kilns to an indirect heat curing.   The federal government has failed to provide assistance for conversion.

Ontario has paid approximately $4.5 million into NISA accounts for tobacco farmers.   And many tobacco growers have crop insurance - with payouts from the province in the year 2001 reaching $1.5 million.  

Whenever cigarette tax grabs are suggested I oppose them.   The Ontario government is known for tax cuts, not increases.   With tough years recently including adverse weather, increasing world tobacco supply, marketing challenges, active anti-tobacco zealots and blue mould, I believe farmers do not need crippling tax hike to worry about.