Tuesday, May 19, 2009

Let's sue somebody, government hypocrisy

Provincial governments are lining up to file a class action suit against the tobacco companies, ostensibly to recover costs for treating “smoking related” illness.

Back in March, Ontario’s Attorney General, Chris Bentley, proposed legislation that would give the province legal standing to sue tobacco companies. Bentley claims the annual cost to the health care system in Ontario is 1.6 billion dollars and the government wants the tobacco companies to foot the bill.

And, a week or so back, the Calgary Herald was reporting similar legislation was being considered which would allow Alberta to climb aboard what many provincial governments see as a potential gravy train. They should take a second look; the potential adverse consequences could be catastrophic.

As the Herald article points out, the government already collects more in tobacco taxes that it alleges it spends on health care for smokers.

According to the figures provided on their web site, Physicians for a Smoke Free Canada estimate that the total cost of medical treatment for smokers was $4.36 billion in 2006. For the 2005/2006 fiscal year, combined revenue for the two senior levels of government was $7.09 billion from taxes on tobacco products, not including sales taxes and taxes paid directly by the tobacco companies.

Yet, the provincial governments, perhaps driven by the constant badgering of the anti-smoker cult, are determined to extort even more money from Canada’s 5 million smokers. And, no doubt about it, it will be smokers who pay the price.

When state governments in the US settled their lawsuit against the tobacco companies, the price of cigarettes was raised to offset the cost. Only an insignificant fraction of the multi-billion dollar settlement, called the MSA (Master Settlement Agreement), was spent to benefit smokers. And, even that amount was directed to anti-smoker groups to “encourage” smokers to quit through a campaign of harassment and intimidation.

But, if provincial governments are hoping to emulate the US agreement, they’re in desperate need of a reality check.

Point number one: As noted in the Herald article, claims that the industry misrepresented the potentially harmful effects of “light” cigarettes are somewhat disingenuous. Dr. Michael Siegel points out on his blog, Tobacco Analysis, the introduction of low tar and nicotine (light) cigarettes was a recommendation made by the National Cancer Advisory Board in the US. The tobacco companies implemented the advice voluntarily. To turn around over 30 years after the fact and accuse the industry of misrepresentation is a stretch.

Point number two: If the government really believes that cigarettes and other tobacco products are as lethal as they claim, they should have shown the courage of their convictions and banned cigarettes from the marketplace. Instead, they treated tobacco like a cash cow, milking consumers for every penny they could extract.

The Imperial Tobacco web site notes that out of the estimated $55.46 average cost of a carton of value brand cigarettes, the government collects $42.93 in taxes. Over 75% of the cost of a carton of cigarettes goes to the government in one form of taxation or another. This misguided and hypocritical lawsuit is merely another cash grab by money hungry politicians.

Point number three: The high cost of cigarettes, due to usurious levels of taxation, has led to a huge black market in contraband smokes. Federal and provincial governments easily generate four times the revenue of the tobacco companies every year. And, with each new tax grab, contraband activity increases. Despite huge increases in taxes in recent years, government revenues from taxation have actually declined. Tobacco consumers have turned, justifiably, to the black market to provide their tobacco needs. Nobody likes to pay extortion, legal or otherwise.

Point number four: Canadians who approve of ill-advised tobacco tax policy designed to control personal behaviour should give their support some serious second thought. It’s a very slippery slope. Governments in the US and Britain are already contemplating an obesity tax on soft drinks, junk food and increased sin taxes on alcohol.

The tax grabs won’t stop with tobacco. And, if the government succeeds in bankrupting the tobacco companies, or forcing smokers to quit in great numbers, someone will have to make up the billions in lost revenue currently being extorted from smokers.

Canadians riding the anti-smoker bandwagon should start thinking about where the government will turn to replace that lost revenue, especially if they’re a little overweight or enjoy a cold beer on a warm afternoon.

Because they're next on the hit list.

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