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July 9, 1997
(Finance)

 

Government reduces Tobacco Tax Rate for Southern Labrador and Labrador West

Finance Minister Paul Dicks announced at a news conference in St. John's today that effective midnight tonight, government will lower the tobacco tax rate in Labrador West and Southern Labrador equivalent to the difference between the Quebec rate and the Newfoundland rate, based on a quota system. The move comes in response to a number of discussions with the business community in the areas, and will see a carton of cigarettes which previously was approximately $50, reduced to about $34 per carton.

"In Labrador West and Southern Labrador, where individuals have easy access to cheaper tobacco, cross border shopping has been a major problem," said Mr. Dicks. "This has created a strain on local businesses, as consumers who shop outside their own area also buy other commodities. This has had negative effects on the economy and employment in Labrador West and Labrador South."

Up to now, government has been reluctant to implement special measures in these areas because of the implications for the remainder of the province. "We are implementing a proposal, which if properly monitored by the business community and the province, should eliminate the problem without any major impacts on the remainder of the province, and should not result in significant revenue erosion."

The annual quota of cigarettes eligible for the reduced provincial tobacco tax rate for Labrador West is 110,000 cartons and for Southern Labrador the annual quota is 16,000 cartons. The tax reduction will be delivered through a rebate to the retailer on a monthly basis and will be administered by the Department of Finance.

"The total quota has been set by government, and the tobacco retailers have allocated this quota among themselves on a reasonable basis," said the minister. "A protocol will be developed for re- allocating the quota among retailers as the need arises, including implementing and adjudicating a dispute settling mechanism for any dissatisfied retailer."

Minister Responsible for Labrador, Ernie McLean, was also on hand for the announcement. He said: "Tobacco retailers also will play a part in levelling the playing field between Labrador and Quebec, as they have committed that mark-ups on cigarettes will be consistent with their Quebec competitors."

Mr. McLean said a strong commitment on behalf of the businesses in Labrador West and Labrador South is required to make this program work. If the lower taxed tobacco in Labrador West is made available in areas outside the regions, the program will be discontinued.

The current price of cigarettes in Quebec is about $30 per carton. The remaining difference in price between Quebec and the Labrador border zones reflects different federal taxes.

Labrador West MHA Perry Canning held a simultaneous news conference in Labrador City, along with representatives of the Labrador West Chamber of Commerce, to discuss the new pilot project.

Contact: Karen McCarthy, (709) 729-0110.

1997 07 09 2:50 p.m.

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