Proposed tax would keep tobacco prices from dropping once Manitoba cuts PST

Manitobans expecting a pack of cigarettes to be cheaper once the provincial sales tax drops are out of luck. 

In response to lobbying from anti-smoking groups, the provincial government is planning to impose a higher levy on tobacco to offset the one percentage point reduction in the provincial sales tax that comes into effect on July 1. 

The legislation, introduced Tuesday at the Manitoba Legislature, is a change of course for the provincial government, which earlier seemed reluctant to introduce measures to maintain the price of cigarettes and other tobacco products after the upcoming PST cut.

The province argued last month that high prices were pushing Manitobans to the black market and increasing smoking rates. 

Finance Minister Scott Fielding wouldn't discount that argument on Tuesday, but he said it became clear an "unintended consequence" of the PST cut was making addictive products cheaper.

Government that listens: Fielding

After speaking with anti-smoking groups, the Progressive Conservative government agreed it didn't want to make tobacco more appealing.

"As a government, sometimes you want to listen to stakeholder groups and when they make a good point, we can make some public policy change," Fielding said. "That's what we did."

The issue was raised publicly last month when the Opposition NDP presented a letter written by several health agencies that asked the government to ensure the price of cigarettes doesn't drop with the tax cut.

The request, sent to every Manitoba MLA, was signed by the Canadian Cancer Society, the Lung Association of Manitoba, the Heart and Stroke Foundation and the Manitoba Tobacco Reduction Alliance.

On Tuesday, Fielding announced the increased tobacco levy will take effect on July 1, along with the PST cut, if the bill receives royal assent before the legislative session ends on June 3. It will ensure the retail price of tobacco will remain approximately the same once the PST is cut. 

The NDP plans to endorse the bill, since the party called for it to be enacted in the first place, Leader Wab Kinew said. 

Under the legislation, the tax on each cigarette will rise from 29.5 cents to 30 cents. That would add 10 cents to a pack of 20 cigarettes.

The surcharge on fine cut tobacco would be 45.5 cents per gram, an increase from 45 cents.

We give ourselves a bit of a pat on the back, because it is a positive step.- John McDonald, Manitoba Tobacco Reduction Alliance

Sarah Hawkins, a health policy analyst with the Canadian Cancer Society, campaigned for the price of tobacco to hold steady after the PST cut. She worried a reduction in price would put tobacco in the hands of cost-conscious youth.

"I think it shows that they're willing to look at the evidence and put the health and welfare of Manitoba youth first." 

John McDonald, executive director of the Manitoba Tobacco Reduction Alliance, said he's thrilled the government was persuaded to change its mind. 

"It's been a lot of hard work. It's nice to hear that people are listening," he said. "We give ourselves a bit of a pat on the back, because it is a positive step."

The agencies' letter last month suggested an increased tobacco tax would raise $5.5 million in revenue.

The province did not provide an estimate on expected revenue from the increased tobacco levy. 

Smoking rates falling provincewide

Canadian governments have been known to keep the price of cigarettes neutral in response to tax cuts.

The federal Conservative government did not allow the retail price of cigarettes to fall when the GST was lowered in 2006 and 2008. When the goods and services tax was cut to six per cent in 2006 and five per cent in 2008, tobacco excise duties were raised to cancel out the GST reduction.

The percentage of Manitobans who smoke has fallen gradually over time.

A survey conducted by the federal government found 14.5 per cent of Manitobans smoked in 2017,  a decrease from 14.8 per cent in 2015.