Don’t Let International Bureaucrats Control Canada’s Tobacco Taxes

Taxing tobacco in order to reduce consumption might seem like a no-brainer at first glance — and the higher the better, some might say — but it is problematic for a number of reasons.

For one thing, the case of Quebec provides a cautionary tale, as the prevalence of tobacco use has hovered around 24 per cent since 2003 despite a doubling of the price of cigarettes. And to the extent that tobacco taxes do reduce consumption, they can end up reducing total tax receipts, thus working against the competing and contradictory government objective of raising revenue. Of course, government revenue can take a hit without having any effect on consumption whatsoever, thanks to the black market provision of contraband, which tends to expand and contract in step with rising and falling tobacco tax levels. Moreover, taxing tobacco is highly regressive, hitting the poor four times harder than it hits the wealthy.

Given these complex considerations, it is all the more important for Canadians to be the ones setting their own tobacco tax policies. But if the World Health Organization (WHO) has its way, Canada and other countries could lose national fiscal sovereignty over the setting of tax rates for tobacco and over decisions regarding how tobacco tax revenues are to be spent.

From October 13 to 18 in Moscow, the WHO will be holding its biennial conference to discuss the Framework Convention on Tobacco Control (FCTC), a treaty that was adopted in 2003 and came into effect in 2005, and which 179 countries have now ratified. During its previous FCTC conference in 2012, draft guidelines for Article 6 dealing with price and tax measures to reduce demand for tobacco were extensively debated, but ultimately rejected in favour of more general guiding principles and recommendations.

The WHO has continued to work on more explicit guidelines for tobacco taxation, however, and these will be up for debate again at the October meeting. These guidelines will likely include a uniform global tax of at least 70 per cent of the retail price for tobacco products, a target mentioned as "feasible" in official WHO documents. They are also expected to include the earmarking of tobacco taxes to be used to fund tobacco control programs.

If these guidelines are implemented, countries that ratified the original treaty will lose the ability to control their tobacco tax policies. Decisions regarding how much tobacco will be taxed in Canada and what to do with the revenue generated by that tax will no longer be made by officials democratically elected by Canadians, but will be made instead by an unaccountable, non-transparent UN agency with very little oversight.

Such guidelines would also set a dangerous precedent for the WHO and other UN bodies to use in overriding domestic fiscal policies for things like alcohol, sodas, fast food, oil and gas, and any other product that internationalist busybodies deem too sensitive to be left to the vagaries of national democracy.

For these important reasons, it is crucial that the October meeting in Moscow be attended not only by members of Health Canada, who are likely to support such measures, but also by senior Finance Department officials who can be expected to have a different perspective. At least then, there's a better chance that a broader debate will take place over who should be entrusted to make decisions regarding the setting of tax levels and the spending of tax revenue.

Michel Kelly-Gagnon is President and CEO of the Montreal Economic Institute. The views reflected in this column are his own.

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