Monday 27 March 2017

Shell games with tobacco taxes

Tobacco manufacturers' profits surtax eliminated
Last Wednesday (March 22), Canada's finance Minister, the Hon. Bill Morneau, presented his second budget. Buried within it, on page 207, was an announcement that the federal government was backing out of one of the world's few special taxes on tobacco companies. He replaced the tobacco manufacturers' profits surtax with a small increase in tobacco excise tax  This tobacco tax shell game shifted the last bit of tobacco tax burden from the shoulders of corporate shareholders to the shoulders of smokers. Now, smokers bear all of the tobacco tax burden and the tobacco companies bear none.

We started with noble intentions
The government's intentions to link this tax with health programming were clear when was launched in 1994 (on the same day that the federal government announced that it would slash excise taxes in an attempt to combat contraband). In announcing the tax on February 8, 1994, Prime Minister Jean Chrétien told Parliament:
We are imposing a three-year health promotion surtax on tobacco manufacturing profits. This surtax will increase the federal tax rate on manufacturing and processing tobacco products from 21 per cent to 30 per cent. Companies will pay 40 percent more federal tax on manufacturing profits than they have in the past and the federal government will receive up to $200 million in extra revenue over the three years. The money generated by this surtax will fund the largest anti-smoking campaign this country has ever seen.
Chipping away at noble intentions
Over the years, those clear and noble intentions of 1994 were gradually chipped away. The revenue was collected for the first decade, but the spending on tobacco control soon plummeted. From $60 million a year in 1994 to $10 million  a year two years later. (Surveying the Damage, page. 49).

The Department of Finance continued to collect the money.  In 2001, the tax was made permanent, references to 'health promotion' were dropped, and the surtax rate was increased from 40% to 50%, but none of that money was earmarked for tobacco control. This information can be found buried in Footnote 26 to Table 2 of the 2005 document Tax expenditures and evaluations, produced by the Department of Finance.

Then the tobacco companies set about finding ways to avoid paying the tax.  In 2006, Imperial Tobacco moved its manufacturing operations to Mexico, thereby becoming an "importer" and avoiding the tax altogether..  Tobacco companies also use intercorporate transactions with newly-created shell companies  and intercorporate transactions with sister companies in other countries to avoid paying corporate income taxes. In 2007 and again in 2012, the government reduced the base rate of corporate tax.  This had the effect of also lowering the tax yield from the surtax. The net effect of all these tax-avoidance and tax-lowering schemes has been to whittle the tax yield from the surtax down to very little.

All of of this has been monitored by the Canadian Coalition for Action on Tobacco (CCAT), of which Physicians for  a Smoke-Free Canada is a member.  Our 2016 Brief to House of Commons Committee on Finance called for the surtax to be restored to effectiveness by making it apply to importers as well as manufacturers and by defeating various corporate tax avoidance strategies.

Clearly, our recommendation was ignored.  However, the central problem remains.  The tobacco industry avoids all financial responsibility for contributing to mitigation of  the epidemic that they have caused while government and community programs to control tobacco remain woefully underfunded.

Make Big Tobacco pay
What the Department of Finance was unwilling to do by one means can be done by another.  Experience has shown that manfacturers' profits can be manipulated and taxes on them can be also be manipulated, one way or another.  In addition, government can lower the rate of corporate profit tax, thereby lowering the yield a profits surtax.  So let's forget all that and start charging the tobacco companies a flat fee to pay for fixing the problem they created.

In 1994, Prime Minister Jean Chrétien set the cost of tobacco control at $200 million for three years.  To make up for lost time and the effects of inflation, let us set the fee at $200 million, but payable every year,  The fee could be apportioned among manufacturers and importers, according to their market share and adjusted periodically to account for inflation.  The money would go directly to tobacco control programming and could not be spent for any other purpose.

It is time to make Big Tobacco pay. And to apply that payment to health.

Thursday 23 March 2017

1.45 million smokers are still missing

2015 smoking data  from the Canadian Community Health Survey are now available

On March 22, Statistics Canada published new smoking data from the Canadian Community Health Survey (CCHS2) for the year 2015. This is the second federal government survey to provide estimates of smoking -- a little over 4 months ago, the 2015 results of the Canadian Tobacco, Alcohol and Drugs Survey (CTADS) were made public.

As we reported in a blog post last November, the gap between these two surveys keeps growing. The (larger) CCHS survey produces an estimate of the number of Canadian smokers which is 38% bigger than that of CTADS -- some 1.45 missing smokers.

Does this matter? Perhaps not at an operational level. Either number justifies the need for effective and sustained interventions on the part of government, communities, families and individuals.

But in evaluating success, the surveys leave very somewhat different impressions. According to CTUMS/CTADS, there was a 23% reduction in the number of smokers between 2005 and 2015, and a 31% reduction in smoking prevalence. The CCHS data* show a 10% drop in the number of smokers an 18% drop in prevalence. Progress by either count -- but much less so by one than the other.

Smokers #








* The 2001 and 2015 CCHS survey used somewhat different methods, and Statistics Canada does not compare them with results from 2003 to 2014. Another complexity in the search for estimates. 

Tuesday 21 March 2017

Tobacco retailing in France

Big Tobacco hides behind tobacco retailers

In France, for much of the 20th century the entire tobacco industry – manufacturing, wholesaling and retailing – was contained in a state monopoly, SEITA (Société d’exploitation industrielle des tabacs et des allumettes). Like many other state tobacco monopolies, SEITA was broken up and passed into private hands at the end of the 20th century. Only a vestige of the former SEITA remains in the hands of the state – tobacco retailing. While the individual retailers are nominally independent business persons, their very existence as tobacco retailers relies on the authorization of the French government and their numbers are strictly limited. Currently there are about 25,500 tobacco retailers in France.

Those retailers have a trade association, the Confédération des buralistes. The French tobacco control organization, the Comité national contre le tabagisme (CNCT), has documented how this trade organization gets money from the tobacco industry and serves as its mouthpiece. The Confédération maintains a veneer of financial independence from the tobacco industry. But like all veneers, it is only a thin layer. The tobacco industry overpays the Confédération for various goods and services like advertising in trade magazines and newsletters, producing pamphlets and participation in conferences.

Canadian readers will recognize a similar pattern, where tobacco retailers are also beholden to the tobacco industry and where tobacco manufacturers have a lot of influence over retailers. Tobacco companies fund provincial and national convenience store associations and then use them as fronts to lobby against tobacco control measures.  The strategy has been largely successful. According to a previously secret internal tobacco company document, the lobbying strategy yielded no new tax increases and no new anti-tobacco regulations.

Publicly controlled tobacco retailing in France is in trouble

While the former SEITA was mostly privatized in the 1990s, the French state, through the Ministry of the Economy and Finance, maintained monopoly control over tobacco retailing and continues to hold that monopoly control to this day. From a public health point of view, the state-controlled monopoly system has a fatal flaw. The government control of the retail system is in the hands of the Ministry of the Economy and Finance, not the Ministry of Health and the former rarely or never consults the latter about how to govern tobacco retailing. The governance provided by the Ministry of the Economy and Finance has been examined, and found woefully wanting.

Tobacco retailing slammed by the Cour des comptes

Canadian readers will be familiar with the reports of the Canadian Auditor General that document government waste and misspending. The Cour des comptes serves a similar function in France. In its Annual Report,issued in February 2017, the Cour des comptes was particularly scathing in its criticism of the governance of tobacco retailing in France. As of 2015, the Ministry of the Economy and Finance had issued 25,492 contracts to individual tobacco retailers, and only those retailers are allowed to sell tobacco in France. In addition, there are eight programs that offer a variety of government subsidies to tobacco retailers. These subsidies are meant to help cover the costs of increasing store security, to help with diversification of services offered by the retailer, and to serve as supplementary retirement income, among other purposes. All were found to be poorly targeted and poorly controlled. There was evidence of fraud and there was little evidence that any public purpose was being served.

One activity that the Finance Minister requires of the tobacco retailers seems laudable. By a regulation renewed on January 16, 2017, tobacco retailers are required to undertake both initial training and in-service government-sponsored training on how to run their businesses. On both occasions, the training include modules on “public health issues concerning tobacco, tobacco’s place in society and the health hazards of tobacco use. ” But the Cour des comptes found fault with its past implementation. No information is collected on the quality of the supposedly obligatory training in public health issues. There is no proof available to the Cour des comptes that the training even occurs with the required regularity. (2017 report of the Cour des comptes, footnote 272).

The Cour des comptes found the whole system so out of touch with public policy that it called for nothing less than wholesale reform of the entire system:
“With regard to tobacco retailing, the central objective of current public policy favours public health. Recent policy decisions seek to reduce tobacco consumption. At the same time, various programs of support for tobacco retailers are being developed and implemented by the Customs Authority or the Ministry of the Economy and Finance, in close collaboration with the tobacco retailers’ association (Confédération des buralistes) that co-manages some of the programs. The Ministry of Health is absent from these processes.
“This lack of cohesion in public policy results in inappropriate support to the tobacco retailing profession. The system needs to be completely rebuilt. ” (author’s translation)
Advice to France:  Do not throw the baby out with the bathwater

In the face of such a damning assessment by the Cour des comptes, one might be tempted to give up on public administration of tobacco retailing and privatize the whole sector. We would urge France to reject this option. Canadian experience, where tobacco retailing has always been in private hands, shows that, as bad as the problems might be in France, they could be worse. In Canada, Big Tobacco has gained near complete control over tobacco retailing by eliminating distributors and putting retailers under direct contract. In addition to using tobacco retailers’ associations as lobbyists, Big Tobacco controls the prices that retailers can charge for cigarettes. The Quebec Coalition for Tobacco Control (Coalition québécoise contre le tabagisme– CQCT) has documented how retailers are forced to sell some brands at high prices and others at low, discount prices. The discount brands are prices so low that the intended deterrent effect of tax increases has been completely subverted. Under Canada’s private-sector distribution system, retailers, both individually and collectively, have become foot soldiers in Big Tobacco’s war on tobacco control measures. As it considers how to reform tobacco retailing, France should not consider privatization as a viable option.

More advice to France:  Reform tobacco retailing and give it a public health purpose

There can be no doubt that the system of tobacco retailing in France is badly in need of reform. But, at the very least, France has a system, and it can be reformed. The Cour des comptes has pointed the way towards constructive reform of tobacco retailing. Here are some suggestions for reform, largely inspired its recent report:
  • Maintain government control of tobacco retailing, but align the operation of tobacco retailing with the government’s public health goal of reducing tobacco consumption.
  • Include the Minister of Health as one of the Ministers responsible for the administration of tobacco retailing.
  • Ensure conformity with all public health and tobacco control laws and regulations by every tobacco retailer.
  • In conformity with Article 5. 3 of the Framework Convention on Tobacco Control (FCTC), prohibit retailers, either individually or collectively through their trade associations, from receiving any direct or indirect payments or any other form of in-kind consideration from the tobacco industry or its representatives. (As agents of the state, retailers should be considered part of the government’s tobacco control system and therefore subject to the FCTC requirement for non-interference of the tobacco industry.).
  • Require tobacco retailers and their employees to undertake training in how to give brief, effective advice on smoking cessation and how to refer smokers to community smoking cessation resources. Monitor the effectiveness of their smoking cessation work and develop a system of incentive payments for notable success in their work on providing smoking cessation advice and referral.
  • Encourage diversity in the goods and services offered by tobacco retailers.
  • End all subsidies described as ineffective by the Cour des comptes. Partially replace such subsidies with new ones that will contribute to the government’s goal of reducing tobacco consumption.

Wednesday 15 March 2017

Forecasts for transparency in tobacco lobbying

France – Sunshine!
An earlier blog reported on innovative tobacco control measures recently implemented in France. But there is more. The same order of May 19, 2016 (Number 2016-623) that created plain packaging also had other important tobacco control provisions. One of these was a requirement for transparency in lobbying by or on behalf of tobacco companies. Article L. 3512-7 requires an annual report on tobacco company lobbying to be submitted to the Minister. Information to be reported by tobacco manufacturers, importers, distributors, as well as businesses, professional organizations and other associations that carry out representations on behalf of the tobacco industry, must include:

·         The total amount paid in salaries to lobbyists and the number of people so employed, measured in full-time equivalents.
·         Amounts paid to purchase lobbying services by consultants on behalf of tobacco companies or their associations, together with the names of the companies so paid.
·         All gifts worth 10 Euros or more given directly or indirectly to elected officials, civil servants or government contractors working on tobacco issues, together with the names and addresses of the beneficiaries of such gifts.

One hopes that this latter provision will ensure that no reportable “gifts” (a.k.a. bribes) will be given by tobacco company lobbyists in the future.

Article L. 3515-5 sets a fine of 45,000 euros for failing to submit a full report.

Decree 2017-279 of March 2, 2017 provides detailed information on the form and manner for submitting such reports. When the system is up and running, reports for the previous year must be submitted by April 1, and will be placed on a public website by the following July 1. For the first year, 2016, the deadline for submission will be May 1, 2017 and the date for mounting on a website will be September 1, 2017.

It will take a while for sunshine to break through the clouds, but by September 1, 2017, the sun will be shining on the once-dark business of tobacco lobbying in France.

Canada – Mostly cloudy

In Canada, reporting by all lobbyists, not just tobacco lobbyists is required more frequently. Monthly reports are required and they are added to an online database that is publicly available. But these reports contain precious little information. Here is an example:

In-house Corporation
Designated Public Office Holders who participated in the communication:
        • Chantal Petitclerc, Senator | Senate of Canada
Subject Matter of the communication: Health
Communication date: 2016-12-08
Posted date: 2016-12-08
Communication number: 5116-389668    View associated registration

All we learn is that one or more unnamed persons from Imperial Tobacco met with Chantal Petitclerc, a Senator, on December 8, 2016 and that they had a chat about “health.” One could presume, since Senator Petitclerc is the sponsor of a tobacco control bill wending its way through the Senate, that they spoke about tobacco. But they were only required to report that they spoke about “health.” The lobby register also contains the names of people who may potentially be lobbying, but no details on the lobbying they might have actually carried out. Unlike France, no information is required on the amount of spending on lobbying.

In Canada, we get frequent reports on lobbying, but the reports are almost always the same – mostly cloudy.

Friday 10 March 2017

How well do smoking cessation programs work?

After all we have learned about smoking since the 1950s, why have we still not conquered the tobacco epidemic? The tobacco epidemic is persistent. From 2000 to 2014, the percentage of former smokers in the Canadian population changed not at all, staying at 37% (Statistics Canada, 2016). New quitters only just replace the proportion of those who relapse or die. The tobacco industry has long known how few smokers quit, which is why it seldom opposes smoking cessation programming. According to tobacco industry monitoring data, from 1971 to 1991, people who managed to stay quit for one year as a percentage of ever-smokers was almost always in the very narrow range of 1–2% per year. The lowest value was 0.4% in 1983 and the highest was 2.2% in 1976 (Imperial Tobacco Ltd., 1991). More recent, but similar low rates of quitting in Ontario were reported by the Ontario Tobacco Research Unit (OTRU; 2016). During the period 2007–2014, annualized quit rates were reported to be in the range of 1.3–2.2%.

Still, people do successfully quit, eventually. It may take them many tries, but many are successful. By 2014, there were about twice as many former smokers as current smokers in Canada (Statistics Canada, 2016).

How do people quit? Most successful quitters do so on their own. In Ontario in 2014, only 1.7% of smokers succeeded in quitting for a full year, and most of these quit on their own.  About two-thirds of those successful quitters did not use any of the ten cessation services evaluated by OTRU (OTRU; 2016). Currently, about two-thirds to three-quarters of Americans who quit do so on their own (Chapman. & Mackenzie, 2010). Looking back in time, the figures are even higher. In 1986, it was estimated that over 90% of Americans who had quit smoking up to that point in time had done so on their own American Cancer Society. (1986)In earlier years, less assistance for smoking cessation was available.  Most people quit on their own.

But what of the others, those who do seek assistance for smoking cessation? How successful are they? Nicotine replacement therapy (NRT) is a popular form of providing smoking cessation assistance and a Cochrane review of over 130 studies found that NRT achieved a success rate that was 50–70% greater than that achieved with placebo (Stead et al.,2012). However, there are sound reasons to believe that this apparent success is not maintained when the therapy moves from the research environment to the real world. John Pierce and his colleagues reported that after three or more months of follow-up, Americans who quit smoking on their own had slightly higher success rates than those who used NRT or some other form of assistance. Among heavy smokers, the NRT three-month success rates was 9%, compared with 15% among those who quit unassisted (Pierce et al., 2012).

Cessation programs have neither broad reach nor outstanding success rates. The Ontario government provides support to 10 different smoking cessation programs. These programs all use well-established forms of assistance of proven worth. They range from minimal interventions like helplines to intensive system-wide interventions in health care settings. Their reach and effectiveness were carefully evaluated. Collectively they reached 139,000 people—about 7% of all Ontario smokers. Of these, it was estimated that about 12,000 actually quit smoking, which amounts to only about 0.6% of all smokers in Ontario (OTRU, 2016). Ten government-supported forms of smoking cessation assistance yielded a barely perceptible increase in the number of people in Ontario who successfully quit smoking.  Recently, the Ontario government announced that it will increase in spending on smoking cessation programming by $5 million per year.

The picture seems bleak. Smoking cessation rates are low. Few people use assistance, and assistance is not very helpful.

Years of experience with tobacco control has taught us that comprehensive tobacco control programs work best and that no comprehensive tobacco control program will be credible unless it includes smoking cessation programming. Even if success rates are low, some people are helped by receiving assistance in quitting smoking. Some will succeed in quitting smoking with one or another of these strategies in one or another of these settings. For others, assisted smoking cessation will be a first step or an intermediate step in a longer journey toward quitting. A single attempt to quit smoking should not be viewed as a success or a failure, but as a rehearsal in which something is learned. There may be several more rehearsals before opening night.

Another important reason to ensure smoking cessation services are widely available in clinical settings is because of the moral and legal reasons to do so. Smoking cessation service do achieve success, albeit modest success. Failure to treat tobacco addiction should be viewed as a serious lapse of professional practice, not unlike failure to monitor and treat high blood pressure or diabetes.
Smoking cessation practitioners will often feel that they are swimming upstream against an unceasing strong current. They are. One element of this strong countercurrent is the drug itself. A far more important element of the strong countercurrent is the tobacco industry. Big Tobacco can and does maintain and even increase the attractiveness and addictiveness of cigarettes and other tobacco products. Despite controls that have been placed on the tobacco industry in recent decades, Big Tobacco continues to stimulate demand for its products. It successfully sells over 5 trillion cigarettes per year worldwide to more than 1 billion smokers, and earns over US$20 billion in profits by doing so. A few smoking cessation practitioners here and there are no match for this global drug-pushing machine.

Or are they? Smoking cessation practitioners can stay in their clinics, continue to treat patients and enjoy only a modest rate of success. If that is all they do, the relentless ground war of attrition against Big Tobacco will continue, with neither side clearly gaining the upper hand. So here is a challenge. In addition to their clinical work, smoking-cessation practitioners are invited to become advocates for a tobacco-free future. Phasing out tobacco is possible. Smoking cessation practitioners, by becoming strong and effective advocates for a tobacco-free future, can help make it happen.


American Cancer Society. (1986). Cancer facts and figures. Atlanta, GA:
Statistics Canada. (2016). Canadian Community Health Survey. Public use microdata file. Cycles 1–7. Unpublished tabulations.
Statistics Canada. (2016). Canadian Community Health Survey. Public use microdata file. Cycle 7. Unpublished tabulations.