Budget 2005 announces tobacco tax increase

Budget 2005 brings an increase in the tax for both cigarettes and fine cut tobacco. The increase is effective 12:01 a.m. March 22, 2005, and applies to all wholesale and retail sales from that time.

�This increase is in keeping with government�s tobacco reduction strategy and smoking cessation programs,� said Loyola Sullivan, Minister of Finance and President of Treasury Board. �Tobacco use continues to be the leading cause of preventable illness and death in Canada. It is incumbent upon government to take all measures possible to reduce tobacco use.�

For manufactured cigarettes, the tobacco tax will increase from 16 cents to 17 cents per cigarette, and the increase for fine-cut tobacco will be from 20 cents per gram to 25 cents per gram, an increase of about 2.5 cents per roll-your-own cigarette. Wholesalers are required to collect the new rate of tax from 12:01 a.m. on March 22, 2005. 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.

�Through this tobacco tax increase, government will generate an additional $9.6 million in revenue which will help to fund much needed programs and services,� said Minister Sullivan.

Responsibilities of retailers and wholesalers
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 22, 2005. 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

Labrador border zones
These tobacco tax increases do not apply in the towns of Labrador City and Wabush, or 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 these 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, 685-4401

2005 03 21                       2:25 p.m.