Tobacco tax rate adjustment for Labrador border zones

Loyola Sullivan, Minister of Finance and President of Treasury Board, today announced an adjustment to the tobacco tax rate for Labrador border zones.

Effective today, December 16, 2003, the tobacco tax rate for cigarettes will increase from 7.1 cents to 8.25 cents per cigarette and the rate for fine cut tobacco will increase from 7.5 cents to 8.64 cents per gram. The increase is in response to a tobacco tax increase in Quebec.

"Increasing tobacco taxes is a proven method of reducing the number of smokers and the amount of tobacco smoked. It is particularly effective in discouraging youth from smoking. While it would be desirable to have uniform tobacco tax rates apply to all smokers in the province, in the past, smokers in Labrador West and the Straits have made the short drive to neighbouring communities in Quebec to buy cheaper tobacco," explained Minister Sullivan.

"We want businesses in the Labrador border zones to remain competitive with neighbouring areas in Quebec. Equalizing the tobacco tax rates in Labrador communities with neighbouring communities in Quebec reduces the incidence of cross-border shopping and helps protect jobs. The Quebec tobacco tax increase allows us to bring the tax rates in the Labrador border zones closer to the rates paid in the other areas of the province," he said.

The lower tobacco tax rate for the Labrador border zone is delivered through a rebate program. Retailers pay the regular tax, and then apply to government for a rebate. As a result of the tax increase, the rebate to retailers will decrease. For cigarettes, the rebate amount will decrease from 7.9 cents to 6.75 cents, and for fine cut tobacco, the rate will decrease from 7.5 cents to 6.36 cents per gram.

The Labrador border zone includes the towns of Labrador City and Wabush, and the coastal region extending from the Quebec border up to and including the community of Red Bay. Reduced tobacco tax rates in these zones have been in place since 1984.

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

2003 12 16                                        11:10 a.m.