Tobacco Tax Increase

Loyola Sullivan, Minister of Finance and President of Treasury Board, today announced an increase in tobacco taxes. The increase is effective 12:01 a.m. March 31, 2004 and applies to all wholesale and retail sales from that time.

The tobacco tax on manufactured cigarettes will increase from 15 cents to 16 cents each and, for fine-cut tobacco, it will increase from 15 cents per gram to 20 cents per gram. Since two roll-your-own cigarettes can be made from a gram of tobacco, the effective tax rate per roll-your-own cigarette will increase from 7.5 cents to 10 cents.

"This initiative will assist with government�s tobacco reduction strategy and increase revenues to the province," said Minister Sullivan.

Wholesalers are required to collect the new rate of tax from 12:01 a.m. on March 31, 2004. Retailers are required to take an inventory of tobacco products effective from that time, and submit a tax return and the additional tax to the Department of Finance.

Tobacco tax rates in designated Labrador border zones are not affected by this increase.

• Tobacco tax is imposed upon the retail purchaser, but is normally collected at the wholesale level. The new tax rates apply to all retail sales effective 12:01 a.m.. on March 31, 2004. Consequently, retailers should adjust their prices at that time. An inventory should be completed, and tobacco tax should be remitted to the Department of Finance at the rate of $2.00 per carton of cigarettes, and $5.00 for each 100 grams of tobacco.
• A tax return and inventory form will be mailed within the next few days. Inventory forms may also be found at the Department of Finance Web site at www.gov.nl.ca/fin/tobacco.htm

• These tobacco tax increases do not apply in the towns of Labrador City and Wabush, nor the coastal area of southern Labrador extending from the border with the Province of Quebec to and including the community of Red Bay.
• Tobacco Tax rates in these areas are linked to tobacco tax rates in Quebec, and change when there is a change in tobacco taxes in that province. The purpose of the lower tax rates in these areas is to deter cross-border shopping, thereby protecting businesses and jobs in the areas.
• The lower tax rates in these areas are effected by means of a rebate system. The rebates to retailers in these areas will be adjusted.

Media contact: Diane Keough, Communications (709) 729-6830

2004 03 30                                         3:30 p.m.