Death or Taxes? An Examination of Recent Changes in Tobacco Taxation Policy in Canada

Manipulation of the price of tobacco products has proven tobe one of the most effective tools in tobacco control. However,a strategy relying predominantly on tampering withfree-market conditions by raising prices independently ofthe quantity available is unlikely to be successful over thelong term, unless balanced by equal efforts to reduce demand.Canada has a number of unique factors which combinedto create a contraband market that eventually led topolitical pressure for action at a national level. Althoughpresented with a number of policy alternatives, the federalgovernment based its strategy on reducing tobacco taxes tocompete with the contraband product. Provision of an effectivecomprehensive national strategy to combat tobacco hasyet to be realized. Econometric models predict significantchanges in consumption from drastic tax reductions thateffectively halved the retail price in a large part of Canada.The medical profession and public health authorities willneed to combat these effects, not only by working forrestoration of fiscal pressures but also for sweeping measuresto restrict overall demand if increases in long termmorbidity and mortality are to be prevented