Health Canada report calls for big tax hike on cigarettes

Ottawa needs to hike tobacco taxes significantly to meet its long-term target of reducing smoking to just five per cent of the Canadian population, says a report for Health Canada.

The internal report, obtained by CBC News under the Access to Information Act, says cigarette taxes have been the most effective tool for cutting smoking, based on the Canadian experience since 1999.

"Cigarette taxes had the largest effect, followed by health warnings, smoke-free air laws, retail point of sale bans and cessation treatment policies," concludes David Levy, of Georgetown University in Washington, D.C., drawing on his widely used SimSmoke computer model.

The model, created in 1998, has been commissioned to assess the effectiveness of tobacco-control policies in more than 20 countries.

Levy says increasing cigarette taxes even further will be key to future reductions in smoking levels.

In March, then-health minister Jane Philpott announced the Trudeau government's commitment to reduce smoking to less than five per cent of the population by 2035, from about 14.2 per cent currently.

Canadian governments have aggressively targeted smokers for the last two decades, with a series of restrictions on advertising and smoking locations, in addition to tax hikes. But "there is concern that the decline in smoking prevalence may have slowed," Levy notes.

Tax must rise

Currently, cigarette taxes are about 68 per cent of the retail price. The report says that must rise to 80 per cent to get smoking levels down to about six per cent by 2036 — close to the five per cent government target by 2035. Levy says the government must take action soon to kick-start the decline.

Health Canada is currently reviewing more than 1,700 submissions made during its consultations on the future of tobacco control, which ran from Feb. 22 to April 13 this year. The goal is to replace the current Federal Tobacco Control Strategy, which expires in March 2018.

"Taxation is only one of the levers available to government to achieve its policy objectives," department spokesperson Andre Gagnon said in an email. "The government will evaluate all available tools in determining the best way to reduce smoking rates."

A spokesperson for Finance Canada declined to comment on whether Ottawa is considering tax increases on cigarettes. The 2017 federal budget bumped up tobacco taxes only slightly.

The SimSmoke model incorporates the effect of higher taxes on cigarette smuggling, especially prevalent in Ontario where tobacco is grown and sometimes diverted to the black market, and where organized crime is often linked to First Nations selling contraband. But the model is concerned only with the overall impact of contraband on smoking cessation.

Organized crime is going to come out with the last laugh.- Christian Leuprecht, political science professor

Christian Leuprecht, a political science professor at Queen's University and the Royal Military College, warns that steep tax hikes without accompanying anti-contraband measures have huge risks in the criminal sphere.

"How you introduce that 80 per cent tax is going to have a significant impact on the contraband market," Leuprecht said in an interview. Such a measure needs to be buttressed by better policing and other policies (such as Quebec has introduced), he said, including revenue-sharing with First Nations.

Otherwise, "organized crime is going to come out with the last laugh."

Health Canada paid Levy $60,270 for the SimSmoke research.

In an interview with CBC News, Levy said that the upcoming legalization of recreational marijuana in Canada is unlikely to have much impact on cigarette smoking, though the SimSmoke model does not incorporate that factor.

"I don't think it would have a large impact one way or another," he said.

But he said e-cigarettes, or vaping, could have a significant impact on achieving the Canadian target of five per cent, although there isn't enough data yet to be certain.

Get there sooner?

"With e-cigarettes, I think it's possible to get there sooner if you're willing to push cigarette smokers into e-cigarettes," Levy said. "There's a risk in doing that but I think there's a lot of potential to make the goal more quickly."

He estimated the mortality risk from e-cigarettes to be much lower than for real cigarettes, perhaps between five and 10 per cent of that for cigarettes.

The Trudeau government last year introduced Bill S-5 in the Senate to regulate vaping products, legislation that proceeded to second reading in the House of Commons this month.

The same bill includes a section on plain packaging for tobacco products, a measure promised in the Liberal election platform of 2015 to reduce smoking, especially among youth.

The plain-packaging requirement of the legislation has drawn fire from tobacco companies, who say it will stoke the contraband market partly because consumers will be less able to distinguish between legitimate cigarettes and the smuggled variety.

But Levy said plain packaging, as recently introduced in Australia, is likely to make existing health warnings on cigarette packages more prominent and therefore "would probably make the health warnings more effective."

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