[Intl-tobacco] Get set to cough up more, puffers - Canada on duty free

[Robert Weissman]

Get set to cough up more, puffers / Double whammy eyed
Double whammy eyed
by ANNE DAWSON / OTTAWA BUREAU
Source: Toronto Sun, Tuesday, 9/19/00

OTTAWA --=A0 Travelling smokers would lose their duty-free cigarettes under
an anti-tobacco strategy being considered by the federal government.

 The Toronto Sun has learned Finance Minister Paul Martin wants to impose
an export tax on all Canadian tobacco products currently sold in duty-free
shops.  To do this, the federal government is working with the U.S.
government to come up with a plan to end the practice of being able to
avoid paying tax and duty on smokes in duty-free shops.

In conjunction with this measure to curb smoking, the federal government
is also preparing to slap a $3-to-$5-a-carton tax on cigarettes this fall.

 Sources told The Sun the tax hike, which would increase the price of a
carton of smokes in Ontario from $32 to a maximum $37, is expected to kick
in this fall and would affect Ontario, Quebec, Nova Scotia, New Brunswick
and P.E.I. -- the same provinces that moved in tandem with Ottawa to slash
tobacco taxes in 1994 to stem cigarette smuggling.

 But they said it will likely take longer for Ottawa to work out a
reciprocal export tax deal with Washington -- one that would not only see
new taxes slapped on Canadian tobacco products purchased in duty-free
shops, but on U.S.  tobacco products being purchased by Americans as well.

 "Our objective is to ensure that there are no tax- and duty-free tobacco
products circulating in the North American market, by entering into a
bilateral pre-collection agreement with the U.S.," according to a Canadian
government source.

 "The objective is to work out with the Americans a mechanism by which
there would be a collection of taxes by both sides."

 HEALTH CONCERNS

 Cigarettes can now be purchased tax-free in duty-free shops, providing
the traveller has been out of the country for a certain period of time.

 But for years health groups have pressured the federal government to stop
the practice.

 "We want to eliminate the sale of duty-free cigarettes in Canada and
ensure Canadians returning with tobacco products to Canada pay taxes on
these products," said Canadian Cancer Society lawyer Rob Cunningham.

 "There is no justifiable reason for cigarettes to be sold without taxes
-- it undermines our health objectives, reduces tax revenue and provides
opportunity for tax-free cigarettes to ultimately go into the contraband
market."

 The government source said the upcoming U.S. election is slowing down
negotiations because legislative changes that would be required by
Congress before the new tax-collection system could be put into operation.