PST cut shouldn't make cigarettes cheaper, Manitoba health agencies say

The tax relief Manitobans are expecting once the PST cut takes effect in July shouldn't be felt every time a smoker buys a pack of cigarettes, health organizations argue.

The Canadian Cancer Society is among several agencies calling on the provincial government to institute a tax increase on tobacco to offset the planned one percentage point reduction in the PST, which will make tobacco products more affordable.

"We need to do a better job of protecting the next generation from getting hooked on tobacco products, and making them cheaper is not the way to accomplish that goal," said Sarah Hawkins, a health policy analyst with the Canadian Cancer Society.

The agencies are asking for the provincial government to amend its budget bill to include a tax increase on tobacco when the PST is reduced to seven per cent on July 1, Hawkins said.

Cheaper cigarettes enticing

A letter was sent to all Manitoba MLAs this week arguing the price of tobacco products shouldn't drop.

The matter was raised during question period on Wednesday by the Opposition NDP, which called on the government to follow the advice of various health agencies, including the Heart and Stroke Foundation, the Manitoba Tobacco Reduction Alliance and the Lung Association of Manitoba. 

Premier Brian Pallister responded that the escalating price of tobacco has pushed many Manitobans to the black market and increased the rates of smoking provincewide.

The province said it would not be able to compile statistics to verify those arguments on Wednesday.

After question period, Health Minister Cameron Friesen accused the NDP of creating an environment during its years in power in which the sale of illicit cigarettes has flourished, because the retail price is now too high.

"Those underpriced [black market] cigarettes are targeted often toward youth and that becomes a health issue," Friesen said.

He said his government wouldn't lower the price of tobacco to match other provinces, but would wait for other jurisdictions to "catch up." 

Hawkins said the government appeared to be receptive to the idea in a meeting, but said it was approached too late in the bill's approval process to make changes. Hawkins said the groups were told a new tax may become a priority next year.

She said they weren't satisfied by the province's response.

"I think that they really wanted to have a strong message about reducing the PST, so it just didn't fit into their priorities at that time, and we're hoping to change to that," she said.

She said the government's argument that Manitoba's higher tobacco prices benefit the illicit market is playing into the tobacco industry's arguments.

"It is one of the biggest scare tactics used by the tobacco industry to encourage governments not to increase their taxes," she said.

"In this case it's not super relevant, given that the increase we're talking about is simply to keep a neutral impact on tobacco pricing relative to the change in the PST."

If the tobacco industry was actually concerned about the illicit market, it wouldn't hike its own prices, Hawkins said.

Federal Tories kept cigarette prices level

The agencies' letter suggests the offsetting tax increase would raise $5.5 million in revenue, which could be funneled into general revenues. They estimate the necessary tax on a carton of cigarettes would be $1.15. 

"We believe that this amendment is straightforward, would benefit public health and public revenue objectives, and would find support from all parties," the letter reads.

"We urge all MLAs to support the amendment at the earliest opportunity."

The budget bill containing the PST cut is expected to pass by July 3.

There is a history of governments keeping the price of cigarettes level as past tax cuts have occurred.

The federal Conservative government did not allow the retail price to fall when the GST was lowered in 2006 and 2008, the letter states. When the GST was cut to six per cent in 2006 and five per cent in 2008, tobacco excise duties were raised to offset the GST reduction.