The measure, it was said, would accomplish two main objectives:<\/p>\n
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- One: encourage 50,000 smokers to quit due to rising costs;<\/li>\n<\/ul>\n
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- Two: increase tax revenues by $ 90 million in 2014-2015, $ 120 million in 2015-2016 and $ 115 million the following year (source: La Presse<\/a>).<\/li>\n<\/ul>\n
As for the risk of fueling contraband, the government rejected it, saying it was in decline and largely under control, declining from 30% to about 14% according to its estimate.<\/p>\n
Three years later, what about these predictions?<\/p>\n
Has the tax hike really delivered promised incomes and lowered smoking without encouraging contraband?<\/p>\n
We highly doubt it.<\/p>\n
The figures indicate, on the contrary, that this was a very bad deal for both government revenues AND public health.<\/p>\n
Overstatement of projected revenues<\/strong><\/p>\n
First, the minister was far too optimistic in his predictions of rising incomes, a sign of naivety on his part.<\/p>\n
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- In 2014-15, tobacco tax revenues increased, but only by $ 59 million instead of $ 90 million, or 34% less than expected<\/strong> (source: Public Accounts 2014-2015<\/a>);<\/li>\n<\/ul>\n
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- In 2015-2016, tobacco tax revenues increased from 2013-14 (base year), but only by $ 73 million instead of $ 120 million, or 39% less than expected<\/strong> (source: Public Accounts 2015 -2016<\/a>).<\/li>\n<\/ul>\n
The reason for this disapointing outcome is simple: the decline in smokers far exceeded the planned 50,000.<\/p>\n
But is it because the latter have stopped their ugly habit or rather because they have turned to a new source of supply which is, shall we say, a lot cheaper and a bit illegal?<\/p>\n
- In 2015-2016, tobacco tax revenues increased from 2013-14 (base year), but only by $ 73 million instead of $ 120 million, or 39% less than expected<\/strong> (source: Public Accounts 2015 -2016<\/a>).<\/li>\n<\/ul>\n
- In 2014-15, tobacco tax revenues increased, but only by $ 59 million instead of $ 90 million, or 34% less than expected<\/strong> (source: Public Accounts 2014-2015<\/a>);<\/li>\n<\/ul>\n
- Two: increase tax revenues by $ 90 million in 2014-2015, $ 120 million in 2015-2016 and $ 115 million the following year (source: La Presse<\/a>).<\/li>\n<\/ul>\n
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