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‘They’re clearly losing money’: Quebec slaps new taxes on vapes after drop in tobacco tax revenue

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According to experts in Canada and the United Kingdom, you should only drink two alcoholic beverages per week to prevent cancer, and bringing cake to the office is as bad as second-hand smoke. Second-hand smoke, though, may be on the rise if new taxes on vape and electronic cigarette products continue to proliferate. 

Quebec is now set to implement a new provincial excise tax on vape and e-cigarette products next fall that is expected to charge $2 for every 2 ml of vaping liquid, or “juice”, for each liquid product’s first 10 ml. The existing federal excise duty charges $1 for every 2 ml of juice for any amount up to 10 ml, and then $1 for every 10 ml beyond that.  

According to some advocates, the new taxes are a sign that following the science of public health sometimes gets trumped by the hard realities of provincial balance sheets.

It is no coincidence that the drop in tobacco tax revenue preceded the province implementing an excise tax on vapour and e-cigarette products, says Valerie Gallant, a spokesperson for Coalition des droits des vapoteurs du Québec.

“They’re clearly losing money because of the people that switched from tobacco to vaping, so they’re trying to get that money back,” says Gallant. “It’s totally counterproductive to do that because the more you pay for it, the less attractive it gets for customers.”

MTL Blog reported that vape users in Quebec could pay up to 80 percent of the original product’s cost in taxes. A 2020 study from the University of Waterloo indicated that the province is one of the biggest consumers of tobacco in Canada, with over 12 percent of the population being smokers. 

According to data from Physicians for a Smoke-Free Canada, the amount of provincial and federal tobacco tax revenue has remained largely static since 1995, hovering between 3 and 4 billion dollars when adjusted for inflation. Nonetheless, the same study also estimated every province saw a drop in tobacco tax revenue in 2022. 

Smoking-related illnesses claim the lives of almost 50,000 Canadians annually.

The Government of Canada, the United States Centers for Disease Control and Prevention, and private entities like Johns Hopkins Medicine are united in agreement that vaping and e-cigarettes are safer alternatives to smoking, but also note neither is a completely safe alternative and that they sustain a person’s addiction to nicotine. 

Ian Irvine is a professor of economics at Concordia University who has conducted research into tobacco and alcohol for over two decades. He has worked or consulted for both the federal government of Canada and private entities like the Canadian Vaping Association. 

Regarding the modest data available in Canada regarding the connection, Irvine says there were reported crossover effects between higher prices and taxes on tobacco alternatives and the increased use of combustible cigarettes. 

Irvine says research in the U.S. in this area is more thorough and also indicates there is indeed a correlation, even if the cheaper cost of tobacco down south likely results in a more noticeable crossover effect. 

“That’s a negative for public health, obviously,” says Irvine. 

Research published by the National Library of Medicine, a U.S. government entity, found that increased taxes on vapour and e-cigarette products caused a rise in tobacco sales, as well as vice versa. 

“The reason why people who believe in harm reduction, like myself, argue against high taxes is that what we need to do for public health is to convince people to use less toxic products and cigarettes,” says Irvine. “If you can use a product that’s at most 5 percent as bad as cigarettes, then you’re onto a winner.” 

Maria Papaioannoy is the owner of the Ecig Flavourium chain, which operates in Ontario, and an advocate for vape users. She says the arms of government that deal with vaping from a health perspective and those in charge of taxing it are not on the same page. 

Papaioannoy praises Health Canada’s language when it publicly states vaping is a way to stop smoking cigarettes. 

“They put it in a type of language that is not marginalizing addiction, especially tobacco addiction and addiction to nicotine,” says Papaioannoy. “Then at the same time, you have the other arm of the government, finance, using a common sin tax to further marginalize, and further create a negative stigma of people.” 

The Government of Canada could not be reached for comment in time for publication.

Harm reduction is in vogue within Canada’s federal and provincial governments, with calls to destigmatize the use of hard drugs like opioids, and provide a non-toxic “safe supply” of these narcotics to cut down on often fatal drug poisonings. 

Nicotine addiction, particularly among underage people, is usually one of the key reasons cited by provincial governments for taxes and flavour bans on vapour and e-cigarette products. This was the case in Nova Scotia, British Columbia, and now Quebec.

When asked for comment, Quebec’s Ministry of Finance provided an extract from a December financial update, stating the incoming taxation was meant to help deter youth from vaping, and generate $40 million for the province.

In 2020, Nova Scotia’s provincial government implemented a flavour ban on vapour products, which was followed by shop owners reporting a rise in cigarette sales. The shop owners also cited the effects of altered cross-border shopping habits during the pandemic as another reason for changes to the sales.

Like vaping products, Nicorette chewing gums are sold in a variety of flavours including spearmint and fruit. Papaioannoy questions why vapour and e-cigarettes are the only non-tobacco nicotine products being hit with new taxes even though nicotine addiction is cited as the issue. 

“Vaping helps people who smoke stop smoking…if it was all about nicotine, why are we not taxing gums and lozenges and nicotine sprays?” asks Papaioannoy. 

Charles Sousa enters parliament as a different kind of Trudeau Liberal

News

This week, Prime Minister Justin Trudeau and his Cabinet met for a three-day retreat in Hamilton to plan for the government’s legislative and policy agenda for the upcoming parliamentary session. One voice who wasn’t around the Cabinet table but may be in the near future is Charles Sousa. The former Ontario finance minister will officially join the Liberal Caucus next week after winning the Mississauga-Lakeshore byelection in mid-December 2022. 

While captaining a tight fiscal ship hasn’t been a top priority for the Trudeau government, Sousa’s impending presence may lend some much-needed fiscal credibility to its policy agenda, particularly if a cabinet shuffle places him in an influential role.

With a lengthy history in the business and corporate world, Sousa is almost a throwback to previous generations of Liberals from the banking and finance sector who would lose sleep over budget deficits. ​Prior to the byelection, Sousa sat or directed several boards, led numerous real-estate developments, and was involved in financial services consultations.  

“Most of the colleagues that called on me to do this run was to…be a strong voice, a positive voice to engage with the business community and the economic growth plans that need to be done in order to sustain the programs that matter to people,” says Sousa. 

Founding a small financial services company in 1982, Sousa went on to work in high-level positions at Royal Bank from 1987 until 2007 when he was elected as an Ontario Liberal MPP for the Mississauga-Lakeshore riding, named identically to its federal counterpart. 

Sousa became Premier Kathleen Wynne’s finance minister in 2013, and was described as “arguably the second-most powerful individual in the province.” That lasted until 2018 when he lost his seat, though by a closer margin than most other Liberal incumbents, who were typically blown out of the water in that year’s provincial election. 

Sousa’s re-entry into politics, this time federally, coincides with the Trudeau government’s professed plan for less-unbalanced budgets than usual as the Bank of Canada hikes rates to combat inflation. 

“I think he knows and understands the business community because he’s been part of it, both big and small. So I think that’s a good perspective to have in the Liberal caucus,” says Bob Richardson, a former Ontario Liberal chief of staff. 

However, with an election likely within the next three years, retaining Toronto’s suburbs might take precedence over reassuring the Chamber of Commerce. Choosing Sousa as the byelection candidate might have been Trudeau’s latest bid to convince Golden Horseshoe families not to vote Conservative. 

Richardson says Sousa brings “suburban sensibilities” to the table. 

“He understands what’s going on in communities like Mississauga, as an example, the growth that’s going on, what’s required from a transit perspective, some of the pressures that they’re having on services as well. I think having that knowledge is helpful,” says Richardson. 

Sousa was born in 1958 and raised first in Toronto’s Kensington Market before his family moved to Mississauga, where he still lives. He makes sure to point out that, like thousands of other GTA residents, he always made the daily commute to and from Queen’s Park as an MPP. 

When talking to people in his riding, Sousa says the primary concerns he hears about are the welfare of their families and being able to get good jobs, rather than partisan loyalty. 

“They don’t care if I’m a Liberal or a Conservative, they don’t care if I’m the mayor, or the counselor, or provincial or federal, all they care about is ‘What are you guys doing to get my life in order’,” says Sousa. “These people all have the same concerns, regardless of where they’re from.” 

A recent Abacus poll suggested more Canadians currently trust the Conservatives than the Liberal government to handle health care, the economy, and the rising cost of living. 

“Given where the Conservatives may be going…having someone who is aware of those bread and butter issues, those economic issues is going to be important, given the fact that the leader of the Opposition is also focused on those issues,” says Ali Ghiassi, Sousa’s former chief of staff while he was Ontario’s finance minister. 

Ghiassi says his former boss’s entry into federal politics reflects Canada’s changing economic climate, which commentators say bodes poorly for Justin Trudeau’s preference for deficit spending. 

“I think in the last 15 months, things have really changed when it comes to inflation…having a voice in the caucus that has heard from constituents at the electoral box in the last few weeks is particularly important,” says Ali Ghiassi. “I think the dynamics have changed, and I think the government is quite aware of that.” 

Wynne and Sousa’s Liberal government posted just one balanced budget during his five years on the job, perhaps against Sousa’s own instincts. 

A staunch free marketer and fiscal conservative as a younger man, Sousa’s views changed by the time he became a politician. However, he is still often described as more moderate than many of his colleagues. 

While Sousa did cut small business taxes while Ontario’s finance minister, he also helped craft one of the largest infrastructure spending plans in the province’s history, to the tune of more than $130 billion. 

“I’m not extreme at any spectrum of the political realm, so to speak, I am very much a centric guy,” says Sousa. 

With the Conservatives only needing to win a modest share of Greater Toronto Area ridings to defeat the Liberal government in the next election, Ghiassi says Sousa can help attract more centrist, and perhaps even some centre-right voters, to the Liberals. 

“Having someone with his background, both in the private sector and also in provincial governments where you tend to be a little bit closer to program delivery, I think would benefit the Trudeau government. Whether they choose to put him in cabinet is ultimately their decision,” says Ghiassi. 

Regardless of whether he becomes a cabinet minister, Charles Sousa is entering parliament as a different kind of Trudeau Liberal. Whether he leaves that way remains to be seen.