Tobacco tax increase not applicable in the Labrador border zones

Finance Minister and President of Treasury Board Joan Marie Aylward confirmed today that the tobacco tax increases announced in the 2002 Budget will not apply in designated Labrador border zones.

Reduced tobacco taxes apply in Labrador border zones to help mitigate a serious cross-border shopping problem that existed in Labrador communities close to the Quebec-Labrador border. In order to have competitive tobacco prices with these Quebec communities, tax rates imposed on tobacco in the Labrador border zones are linked to Quebec�s tobacco tax rates. The effective tobacco tax rates in these border zones change only when the Quebec tobacco tax is changed.

The lower tobacco tax rates for Labrador West and the Straits are delivered by means of a rebate program. Under the rebate program, retailers pay the general tobacco tax rate and apply to the Department of Finance for a rebate. The rebate is passed on to consumers in the form of lower prices. These rebate rates will be adjusted as required to maintain the current effective tobacco taxes.

Minister Aylward stated that government�s preference would be to apply tobacco tax consistently to all areas of the province. However, since there is no effective way to control cross-border shopping, government must take a pragmatic approach to protect businesses and their employees in these border zones from unfair competition.

Media contact: Tara Laing, Communications, (709) 729-0329.

2002 03 21                             3:00 p.m.