Bill 199 2009

An Act to amend the Tobacco Tax Act to reduce taxation

Note: This Act amends the Tobacco Tax Act.  For the legislative history of the Act, see the Table of Consolidated Public Statutes – Detailed Legislative History at www.e-Laws.gov.on.ca.

Preamble

Ontario's world-recognized tobacco control policies are collapsing.  The tobacco market is being handed over to criminal organizations that are unregulated and untaxed.  These organizations do not comply with tobacco control measures, including restrictions on advertising, sales to children, labelling, mandatory health warnings and emissions reporting.

Ontario has the highest percentage of illegal tobacco of almost anywhere in the world (50 per cent of tobacco sold), surpassing countries such as Pakistan, Nigeria, Zimbabwe, Brazil, Paraguay, Venezuela and Colombia.  Over 90 per cent of Canada's illegal cigarettes are manufactured on reserves in Quebec, Southern Ontario and New York State.  The majority of distribution is handled by organized crime, which uses the trade to finance drug and weapons trafficking, money laundering and human smuggling, all of which destroy the social fabric of communities.  Everyone from farmers, retailers, processors, manufacturers and the broader community suffers at the hands of these groups.  Hard-working convenience store operators simply cannot compete with criminals who do not comply with tax laws.  Furthermore, illegal tobacco is available to minors for pocket change from criminals who do not ask for proof of age.

During the 1980s and 1990s, high tobacco taxes and retail prices fostered smuggling.  In 1991, it was believed that one in every nine cigarettes in Canada was contraband, yielding $709 million to smugglers.  As a result, the federal government reduced tobacco taxes in February 1994 from $10.36 to $5.37 per carton of 200 cigarettes.  A handful of provinces decided to reduce the retail sales tax on tobacco, with Quebec leading the way, followed by New Brunswick, Ontario, Prince Edward Island and Nova Scotia.  The federal government then reduced its tobacco tax even further in these five provinces.  By April 1994, federal and provincial taxes had been reduced by a total of between $14 and $21 per carton.  In Ontario, taxes on a carton were cut from $28.85 in 1993 to $9.65 in 1994 and, for the most part, the illegal trade ceased.

It is time for Ontario to reduce its tobacco taxes again, this time by one third, and to encourage the federal government to take action as it did in 1994. 

Therefore, Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

   1.  (1)  Subsection 2 (1) of the Tobacco Tax Act is amended by striking out "11.1 cents" and substituting "8.23 cents".

   (2)  Subsection 2 (1.5) of the Act is amended by striking out "56.6 per cent" and substituting "37.7 per cent".

   (3)  Subsections 2 (2.2) and (2.3) of the Act are repealed.

Commencement

   2.  This Act comes into force on the day it receives Royal Assent.

Short title

   3.  The short title of this Act is the Tobacco Tax Reduction Act, 2009.

EXPLANATORY NOTE

The Bill amends the Tobacco Tax Act to set a new reduced tax rate of 8.23 cents on every cigarette and on every gram or part of a gram of tobacco purchased.  The Bill also sets a new reduced tax rate of 37.7 per cent of the taxable price of a cigar on every cigar purchased.  The authority of the Minister of Finance to prescribe different tax rates than those specified in the Act is repealed.