Tobacco tax rebate rates lowered in Labrador border zones

Finance Minister Joan Marie Aylward announced that effective today, November 6, 2001, government has adjusted the tobacco tax rebate rates in Labrador border zones in response to increased tobacco tax rates in Quebec.

With these changes, tobacco tax rates in these zones remain lower than rates in the remainder of the province. The Labrador border zones include Labrador West (Labrador City and Wabush) and Southern Labrador (from the Quebec border to the community of Red Bay). 

In 1994, Quebec lowered its tobacco tax rates to combat a serious cross-border smuggling problem with the United States. The gap between tax rates in Quebec and the border zones was significant, resulting in cross-border shopping, and having a detrimental effect on businesses in these areas.

Since 1997, the tobacco tax rates in the Labrador border zones have been linked to tobacco tax rates in Quebec. The provincial tax on tobacco in these areas is set at a level similar to neighbouring communities in Quebec. This enables businesses in these areas to compete on a level playing field, thereby reducing cross-border shopping. This policy was implemented to protect businesses and jobs in the Labrador border zones, not to provide cheaper tobacco products. 

The lower tobacco tax rates in Labrador border zones are affected by means of a rebate program. Under the program, retailers pay the general tax rate and apply to the Department of Finance for a rebate. 

The Province of Quebec raised its taxes on tobacco products on November 1. Consequently, the rebate rates are being adjusted to reflect these changes. The rebate for cigarettes will be reduced from 7.2 cents to 6.1 cents per cigarette, and the rebate for fine cut tobacco will be reduced from 3.17 cents to 2.07 cents per gram. 

"Tobacco taxes help decrease smoking, especially among youth," said Minister Aylward. "Government would prefer to have uniform tobacco tax rates across the province, however, if consumers can buy cheaper cigarettes by driving a few miles to the Quebec border, it does not help our smoking cessation policy, and it puts jobs in the Labrador border zones at risk."

Media contact: Lynn Barter, Communications, (709) 729-0329.

2001 11 06                           3:45 p.m.