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Tobacco Taxes and Prices in Canada

The price of cigarettes in Canada varies significantly between provinces. Though some of this difference can be accounted for by the wholesale/retail margins, by far the largest impact on price is the different tax levels. The vastly different tax levels date to February, 1994 when the federal and Quebec governments conspired to force down tobacco taxes as a way to cope with the smuggling of tobacco products. The federal excise duty was reduced by $5 per carton across Canada, and by an additional $5, on a matching basis, with any province that reduced its own taxes by more than $5 a carton.

Eastern provinces, with the exception of Newfoundland, soon reduced provincial taxes in order to avoid a feared flood of contraband tobacco products from Quebec. Western provinces chose to keep their taxes intact, and to counter smuggling in other ways. Since the time of the tax rollbacks, there have also been incremental tax increases (the most recent being on February 12) and adjustments in sales taxes. There are alsosignificant differences in the tax treatment directed at different tobacco products, with fine-cut tobacco (used in hand-rolled cigarettes) getting favourable, and often very favourable, tax treatment.

The result is that there is a very complicated landscape of tobacco prices and taxes across Canada. The federal taxes vary from province to province, unlike any other federal tax. The provincial tobacco taxes vary, as do the sales tax rates, and whether these provincial sales taxes are even applied to tobacco products. The federal goods and services tax (G.S.T.) applies by itself in some provinces, is harmonized with provincial sales taxes (H.S.T.) in some others, and is subject to the provincial sales tax in Quebec but not elsewhere.

This price situation is further complicated by the rapid increase in prices charged by the tobacco manufacturers. The industry acts like a cartel in raising prices. Whenever the price leader (Imperial Tobacco) raises prices the other companies rapidly follow. The result that the pre-tax price for which these companies now sell cigarettes is roughly four times the cost of manufacturing the product.

We have sought to pull together information from numerous sources on all of the various taxes as well as manufacturers' prices and the different wholesale/retail margins, in order to give a breakdown by province. While this list is up-to-date for cigarettes, we have not yet obtained information on the level of manufacturers' price increases for fine-cut in October.

Our findings are as follows:

British Columbia

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $5.36.
  • The provincial tobacco tax is $22.00.
  • The wholesale/retail margin is about 6%, or $2.56.
  • There is no provincial sales tax applied to tobacco products.
  • The federal G.S.T. adds 7%, or $3.16.
  • The total price is therefore $48.29.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 13% (or 55 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. (34 cents on a pack of 20). The result is that a pack of 20 now has an average retail price of about $5.14, and a pack of 25 will retail at $6.43.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $22.00.
  • The wholesale/retail margin is about 6.5%, or $2.26.
  • There is no provincial sales tax applied to tobacco products.
  • The federal G.S.T. adds 7%, or 2.59.
  • The total price is therefore $39.66

Alberta

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $5.36.
  • The provincial tobacco tax is $14.00.
  • The wholesale/retail margin is about 11%, or $3.80.
  • There is no provincial sales tax.
  • The federal G.S.T. adds 7%, or $2.68.
  • The total price is therefore $41.02.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 16% (or 55 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. (28 cents on a pack of 20). The result is that a pack of 20 now has an average retail price of about $4.29, and a pack of 25 will retail at $5.36.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $8.00.
  • The wholesale/retail margin is about 12%, or $2.50.
  • There is no provincial sales tax.
  • The federal G.S.T. adds 7%, or $1.63.
  • The total price is therefore $24.93.

Saskatchewan

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $5.36.
  • The provincial tobacco tax is $17.00.
  • The wholesale/retail margin is about 8%, or $3.00.
  • The federal G.S.T. adds 7%, or 2.84
  • There is a 7% provincial sales tax, amounting to $2.84.
  • The total price is therefore $46.23.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 14% (or 53 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. and provincial sales tax (30 cents each on a pack of 20). The result is that a pack of 20 now has an average retail price of about $4.88, and a pack of 25 will retail at $6.10.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $11.00.
  • The wholesale/retail margin is about 13%, or $3.09.
  • The federal G.S.T. adds 7%, or 1.88
  • There is a 7% provincial sales tax, amounting to $1.88
  • The total price is therefore $30.65

Manitoba

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $5.36.
  • The provincial tobacco tax is $16.00.
  • The wholesale/retail margin is about 6.5%, or $2.38.
  • The federal G.S.T. adds 7%, or 2.72.
  • There is a 7% provincial sales tax, amounting to $2.72.
  • The total price is therefore $44.38.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 14% (or 51 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. and provincial sales tax (29 cents each on a pack of 20). The result is that a pack of 20 now has an average retail price of about $4.75, and a pack of 25 will retail at $5.94.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $10.60.
  • The wholesale/retail margin is about 13%, or $3.04.
  • The federal G.S.T. adds 7%, or $1.85.
  • There is a 7% provincial sales tax, amounting to $1.85.
  • The total price is therefore $30.14.

Ontario

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $2.66.
  • The provincial tobacco tax is $4.70.
  • The wholesale/retail margin is about 17%, or $3.83.
  • There is a 8% provincial sales tax, amounting to $2.11.
  • The federal G.S.T. adds 7%, or $1.86.
  • The total price is therefore $30.35.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 22% (or 50 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. (19 cents) and provincial sales tax (22 cents) on a pack of 20. The result is that a pack of 20 now has an average retail price of about $3.16, and a pack of 25 will retail at $3.95.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $4.70.
  • The wholesale/retail margin is about 19%, or $3.33.
  • There is a 8% provincial sales tax, amounting to $1.67.
  • The federal G.S.T. adds 7%, or 1.46.
  • The total price is therefore $23.95.

Quebec

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $2.25.
  • The provincial tobacco tax is $5.94.
  • The wholesale/retail margin is about 15%, or $3.51.
  • The federal G.S.T. adds 7%, or 1.88.
  • There is a 7.5% provincial sales tax, amounting to $2.16.
  • The total price is therefore $30.93.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 20% (or 47 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. (20 cents) and provincial sales tax (23 cents) on a pack of 25. The result is that a pack of 20 now has an average retail price of about $3.23, and a pack of 25 will retail at $4.03.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $2.38.
  • The wholesale/retail margin is about 14%, or $2.13.
  • The federal G.S.T. adds 7%, or $1.21.
  • The 7.5% provincial sales tax, amounts to $1.39.
  • The total price is therefore $19.91.

New Brunswick

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $4.46.
  • The provincial tobacco tax is $7.70.
  • The wholesale/retail margin is about 12%, or $3.28.
  • The H.S.T. adds 15%, or 4.59
  • The total price is therefore $35.22.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 19% (or 52 cents on a pack of 20), and this will be reflected in a slightly higher H.S.T. of 49 cents on a pack of 20. The result is that a pack of 20 now has an average retail price of about $3.74, and a pack of 25 will retail at $4.68.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $5.48.
  • The wholesale/retail margin is about 23%, or $4.20.
  • The H.S.T. adds 15%, or $3.37
  • The total price is therefore $25.86

Nova Scotia

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $4.66.
  • The provincial tobacco tax is $9.04.
  • The wholesale/retail margin is about 12%, or $3.47.
  • The H.S.T. adds 15%, or 4.85
  • The total price is therefore $37.21

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 19% (or 55 cents on a pack of 20), and this will be reflected in a slightly higher H.S.T. of 52 cents on a pack of 20. The result is that a pack of 20 now has an average retail price of about $3.95, and a pack of 25 will retail at $4.94.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $6.70.
  • The wholesale/retail margin is about 13%, or $2.54.
  • The H.S.T. adds 15%, or $3.31
  • The total price is therefore $25.35

Prince Edward Island

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $3.40.
  • The provincial tobacco tax is $12.65.
  • The wholesale/retail margin is about 10%, or $3.12.
  • The federal G.S.T. adds 7%, or 2.41.
  • There is no provincial sales tax applied to tobacco products.
  • The total price is therefore $36.77.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 16% (or 50 cents on a pack of 20), and this will be reflected in a slightly higher G.S.T. 25 cents each on a pack of 20). The result is that a pack of 20 now has an average retail price of about $3.88, and a pack of 25 will retail at $4.85.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $6.82.
  • The wholesale/retail margin is about 22%, or $4.32.
  • The federal G.S.T. adds 7%, or $1.68.
  • There is no provincial sales tax applied to tobacco products.
  • The total price is therefore $25.62.

Newfoundland

* Note: The following rates are for the island of Newfoundland. Different tax rules apply to Labrador, where lower taxes have been applied to stem smuggling from Quebec.

Carton of 200 cigarettes

  • The manufacturers' price (as of October, 1997) is $9.69.
  • The federal excise duty is $5.50.
  • The federal excise tax is $5.36.
  • The provincial tobacco tax is $22.00.
  • The wholesale/retail margin is about 14%, or $5.96.
  • The H.S.T. adds 15%, or 7.28.
  • The total price is therefore $55.79.

Packages of cigarettes

The tobacco taxes stay the same, but the wholesale/retail margin is a higher percentage, which increases the price per unit, thus increasing the G.S.T. The wholesale/retail margin will increase to an estimated 20% (or 85 cents on a pack of 20), and this will be reflected in a slightly higher H.S.T. of 77 cents on a pack of 20. The result is that a pack of 20 now has an average retail price of about $5.87, and a pack of 25 will retail at $7.34.

200 grams of fine-cut

  • The manufacturers' price (as of July, 1997) is $7.00.
  • The federal excise duty is $3.67.
  • The federal excise tax is $2.13.
  • The provincial tobacco tax is $14.66.
  • The wholesale/retail margin is about 22%, or $6.04.
  • The H.S.T. adds 15%, or $5.02.
  • The total price is therefore $38.53.


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