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04/27/2021

B.C.'s new tobacco taxes a blow to c-store operators

The Convenience Industry Council of Canada is highly critical of British Columbia's new tax on tobacco products, saying the increases "will drive adult smokers away from responsible, law-abiding B.C. convenience stores and toward the contraband tobacco market," which runs counter to the province's stated objective of reducing tobacco consumption.

Smokers in B.C. will pay more beginning July 1. The tax increase includes cigarettes, as well as heated tobacco products and loose tobacco. The current tax of 29.5 cents per cigarette, and will go up to 32.5 cents. For loose tobacco, the tax is currently 29.5 cents per gram and this will jump significantly to 65 cents per gram. The tax increase is expected to generate $800 million each year in the 2022/23 and 2023/24 fiscal years, and $780 million this year.

“This measure will create an added incentive to reduce tobacco consumption,” the budget documents say. “Smoking rates are higher among men and lower-income individuals. These populations will bear a greater proportion of the tax increase.”

However, the CICC counters that data shows that such tax increases will drive the growth of the contraband market - criminals will benefit, while convenience store operators (who have served their customers throughout the pandemic) will bear the brunt of the new rules. 

“The BC government knows that there is a direct link between tax increases and growth in the illegal market. If the government really wants to achieve its harm reduction goals and reduce the incidence of youth vaping, they should work with the responsible retailers in our industry,” CICC president and CEO Anne Kothawala said in a statement. “Our members have the best track record in keeping age-restricted products out of the hands of youth. Relying on them to prevent youth smoking and allowing adults to choose safer alternatives should be priorities for government.”

A 2020 study from Ernst & Young, conducted for the CICC, highlighted “there is a massive illegal cigarette market in Canada and a huge cost to provincial treasuries in foregone tax revenue.”

In a release, the CICC argued B.C.'s latest announcement is "another blow to hard-working convenience store operators, who have been hurt by the pandemic even while being identified as essential businesses. Last year, BC regulations restricted the availability of vaping products in convenience stores while handing a monopoly to specialty vape shops and online retailers." 

It is worth noting that B.C., when compared with other provinces, has seen the largest decline in convenience stores in recent years - down by 33% from 2016 to 2019.

“The channel with the best track record in selling age-restricted products will now face a double whammy: a decline in sales of legal tobacco that will move to the black market, and an inability to offer adult customers a reduced risk vaping product. Our industry is perplexed at how it is being treated in light of its past success in protecting communities” said Kothawala.