New data on smoking prevalence & consumption

In a previous post (OK, in several previous posts), I commented on government's refusal to admit that their tax-gouging policies have been an abject failure. They were not accomplishing the stated goal of reducing cigarette consumption, especially among young people.

Instead, with the growing availability of contraband, young people have greater access to cheap smokes than ever. Tobacco retailers are unable to compete with the cheaper product and suffer serious economic harm. And, despite the highest levels of tobacco taxation in Canadian history, governments at both senior levels lose billions in tax revenue.

Confiscatory tax policies create a climate which allows the black market to flourish, increasing policing costs and introducing unregulated, potentially contaminated product to the market. Smuggling, theft, hijacking, the participation of organized crime; all accompany punitive taxes imposed by governments.

Anti-smoker activists have convinced governments around the world that a policy of high taxes is the best way to reduce smoking prevalence. They've been warned repeatedly, by economists and policy analysts, that escalating tobacco taxes can quickly become ineffective and actually do more harm than good.

In 1994, the Canadian government was forced to confront the issue when high tobacco taxes encouraged a thriving black market. The federal government lowered taxes to a more reasonable level and five of Canada's ten provinces introduced similar tax reductions.

The burgeoning market in contraband quickly ground to a halt.

The anti-smoker fanatics, displeased with Ottawa's decision, immediately began lobbying to re-instate the punitive taxes. Lower taxes would cause smoking prevalence to skyrocket, they claimed. And, first to be hurt would be the children who, encouraged by the lower cost, would take up the habit in significant numbers.

The lobbying efforts of the anti-smoker brigade appear to have paid off. By 2000, governments at Queen's Park and Ottawa had begun the steady escalation of sin taxes . . . and the contraband problem, once again, became a serious issue.

Last September, Ontario MPP (Member of Provincial Parliament) Toby Barrett introduced a private member's bill to lower tobacco taxes in Ontario. He was shot down Said Revenue Minister John Wilkinson: "We are with those who believe that we need to get our smoking rates down (and) that taxation is an effective deterrent.”

But, is Wilkinson's claim supported by the facts?

Michel Gadbois, Executive Vice-President of CCSA (Canadian Convenience Stores Association).claims it is not. And, he claims he has the evidence to prove it. Said Gadbois: “Let’s stop pretending that lowering excessive taxes encourages smoking: it is absolutely false and plain to see in the Statistics Canada survey done at Health Canada’s request.”

He was referring to a report prepared by HEC Montreal for the CCSA. The report is based on data in “the biggest study in the country to date examining the effects of decreased tobacco taxes, namely the 1994-1995 Statistics Canada Survey on Smoking in Canada.”

Apparently, following the reduction in sin taxes in 1994, Health Canada commissioned a study by StatCan to explore the issue of whether lowering taxes would significantly impact smoking prevalence rates. They were obviously anticipating a significant increase in smoking prevalence following the tax reduction, likely assuming the data would support that contention.

Because Health Canada wanted data collection to begin immediately, it was decided that the survey would focus on cigarette smoking only. The HEC Report claims the idea was ”to get into the field as quickly as possible and be able to measure any changes in smoking resulting from the decrease in taxes on cigarettes which took place in early February [1994] in certain provinces.” Among the major objectives was to measure the effect of price on prevalence and on amount smoked, and to measure these items in ways that were “consistent with past surveys and planned future surveys.”

But, the StatCan survey data, apparently, did not support anti-smoker claims that lower taxes would increase consumption or smoking prevalence and the survey was buried.

It's unclear how HEC came into possession of the StatCan data. But a press release was issued on January 13, 2010, announcing the report from HEC Montreal.

It is customary for the anti-smoker crowd to dismiss contradictory evidence as the work of the tobacco industry or their “front groups”. But, it will be difficult for them to question the HEC Report on those grounds. It was prepared by Jean-François Ouellet, a well qualified associate professor at HEC Montreal, which is, in turn, a highly regarded business school independently affiliated with the University of Montreal.

And, it will be even more difficult to explain why the StatCan survey data was never made public, given its potential impact on government policy in this area.

The HEC study, entitled “The failure of tax policies to curb tobacco consumption: Results of the 1994 Statistics Canada Survey on Smoking”, observes that: “A statistical test on smoking patterns conducted in some provinces having lowered tobacco taxes and others who did not, does not reveal a statistically significant link - smoking patterns were not significantly lower in the provinces that did not decrease taxes compared to the provinces that did (in fact, the opposite shows a link).”

Also noted in the HEC Report was the fact that, among the five Canadian provinces which reduced taxes, three, including Canada's most populous province (Ontario), had quit rates above the Canadian average.

Another excerpt from the report: “Repeating this comparison while looking at the effects of the tax system on the difference in the number of cigarettes smoked per day during the survey period, the same results appear: no significant difference is observed in the provinces where taxes are decreased and those where they are not.”

In a not so surprising twist, the completed StatCan survey has never been acknowledged or published by Health Canada.

And, if the conclusions of the HEC Report are dependable (there is no cause to suspect otherwise), the reason Health Canada kept the StatCan study under wraps becomes clear. Because it seems to demonstrate, quite convincingly, that higher tobacco taxes do not effectively force adults to quit or deter young people from adopting the habit.

That fact demonstrates, quite clearly, that penalizing taxes are not about public health. It is about punishing smokers and filling government coffers. It shows that Health Canada is not interested in studies which contradict or question the rhetoric of the anti-smoker cult. They will publicize only research that favors anti-smoker doctrine.

And, Canadian tobacco consumers are expected to pay the price.