This week the federal government released the Public Accounts for the fiscal year ending March 31, 2021. Contained within them was information on the amount of excise tax and duties collected by Revenue Canada that related to tobacco (and other goods).
This post reports on these revenues and those of the other 13 Canadian jurisdictions that assess taxes on tobacco products. Further information is available on the following fact sheets:
- Tax data: Tax Revenues from Tobacco Sales (1990 - 2021)
- Tax data: Tobacco tax revenues as a percentage of government revenues (1990-2021)
- Tax data: Provincial and federal tax revenues per cigarette smoker (2003-2020)
- Tax data: Taxes on cigarettes in Canadian jurisdictions
- Briefing note: Tobacco and Vaping Tax Measures in Canada
Adjusted for inflation, combined tobacco tax revenues are the lowest they have been in 20 years.
In fiscal 2020-2021, federal and provincial-territorial governments collected $7.528 billion in specific taxes levied on cigarettes, cigars, manufactured tobacco and other tobacco categories. This is down from the highest amount reported 5 years ago ($8.43 billion in 2016-2017).
Once inflation is taken into consideration, the collective revenues from tobacco taxes of Canadian governments have remained relatively stable over the past 20 years.
Tax increases have (mostly) overcome the impact of falling cigarette sales.
Over the past 20 years, the number of cigarettes legally sold in Canada has fallen, and the decline has been more rapid in recent years.
Nominally, taxes collected in 2019-2020 were slightly more than they had been in 2003 ($7.6 billion vs. $7.1 billion), even though the number of cigarettes sold had fallen by about one-third (from 36 billion to 23 billion). Once inflation is taken into consideration, the value of the tax revenues had fallen by about one-fifth.
In Canada, tobacco tax revenues generally account for about 1% of government revenues. This proportion has been stable in recent years. In the low-tax provinces of Quebec and Ontario, the contribution to government revenues is under 1%, and in no jurisdiction is it greater than 2%.
The amount of taxes provided by an "average" smoker has grown slightly
An estimate of the average amount of tobacco taxes paid by Canadian smokers can be calculated by dividing tobacco tax revenues by the number of smokers in each jurisdiction. Differences between provinces will reflect variances in the tax rates between provinces and also in the proportion of the market which is untaxed (eg. contraband).
By this method, smokers in the Atlantic provinces currently pay the most in provincial taxes - more than $1,800 per year in Nova Scotia and Newfoundland. Smokers in Quebec pay less than half that amount ($733 per year). On average, across the country a smoker payd about $5.00 per day in tobacco taxes to provincial and federal governments, or $1,800 per year.
Although per-smoker revenues have grown over the past two decades, the growth in value is only marginally larger than the inflationary increase. In 2003 the average annual revenue per smoker across the country was $1,257. Although it had grown to $1,800 by 2020, the value of that revenue was only marginally higher ($1,346 if stated in equivalent 2003 dollars).
Note: Statistics Canada cautions that data from the Canadian Community Health Survey for 2020 should be used with caution because of methodological changes imposed by the pandemic. These methodological issues may contribute to the apparent sharp increase in 2020 in some provinces.
