Industry News: Smoking costs could rise by up to $5 a carton

Tax increase anticipated: Tobacco industry fears it will prompt a wave of smuggling

Smokers could be hit with a $3- to $5-per-carton increase in tobacco taxes shortly after Parliament resumes next week.

Cigarette manufacturers are expecting Paul Martin, the Finance Minister, to move on the issue soon in order to keep the federal government's long-term commitment to increase the cost of cigarettes. The Liberal government and the provinces slashed tobacco taxes in early 1994 to combat cross-border smuggling. Since then, the Liberal government has said it will restore the taxes to their pre-1994 level as soon as possible.

Yesterday, federal sources said Ottawa and the provinces have worked out a tax increase and, in conjunction with the United States, have an improved strategy for fighting smuggling.

"I don't think the smuggling issue is under control," said Marie-Jose'e Lapointe, spokeswoman for the Canadian Tobacco Manufacturers Council.

The threat is no longer from the United States, she said, where new export duties make southbound Canadian cigarettes too costly to smuggle back to Canada. The price of American cigarettes now averages Cdn$1.50 a pack more in border states. Instead, manufacturers say the problem is now other countries that manufacture cigarettes much more cheaply.

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