Governments’ lucrative tobacco racket

No one makes more money from tobacco sales than governments do — not tobacco farmers or small tobacco retailers or even tobacco companies. Last year in Canada, federal and provincial governments took in over $7-billion from tobacco taxes. The combined net income of tobacco growers and tobacco companies, on the other hand, was just over $1-billion.

Yet the federal government, through the Canada Pension Plan Investment Board, is also one of the largest investors in the cigarettes online industry, holding nearly $400-million in cigarette company stocks.

So it strikes us as the height of hypocrisy when governments let the tobacco industry keep chugging along, and then sue tobacco companies to recover the cost of health care provided to smokers. We are not in favour of a tobacco ban; individuals should be free to decide for themselves whether they want to take up smoking. But if governments find tobacco use so perilous and repugnant, the obvious course of action that presents itself is to make it illegal.

Why don’t they? The obvious answer is their desire to keep their rich tobacco revenues rolling in.

The latest authority to join the long list of cynical public plaintiffs is the Ontario government, which Tuesday launched a $50-billion lawsuit against a dozen tobacco companies for health services dating back more than half a century. British Columbia and New Brunswick already have multi-billion-dollar suits before the courts, as do several American states.

Seeking to justify the provincial government’s huge damage claim, Ontario Attorney General Chris Bentley declared: “We believe that taxpayers should be compensated for the costs that they have paid.” He then insisted annual tobacco revenues do not even come close to providing fair reimbursement.

But this is simple demagoguery. Last year, for instance, Ontario estimates it provided $1.6-billion in tobacco-related health services — a figure that is almost surely larded up with questionable indirect expenses. Meanwhile, it took in $1.1-billion in excise taxes on tobacco products.

And then there are the unquantifiable benefits it earns indirectly through the thousands of taxpaying businesses that rely on the sale, production, distribution and use of tobacco products– not to mention the government’s own investment profits. If there is an imbalance between receipts and outlays here, we suspect the government is on the winning end of it.

Moreover, Queen’s Park is asking for taxpayer compensation dating back to 1955 — even though the province’s universal health plan, OHIP, dates back only to 1972 and the earliest provincial payments for hospital services began in 1959. It is hard to avoid the impression that this is anything but a crude shakedown of an unpopular industry — much as the United States put the screws to that country’s own tobacco companies with a US$200-billion settlement in 1998.

Mr. Bentley ruled out suing alcohol companies and casinos, too, despite the fact their products and services place similar health and social costs on taxpayers’ shoulders. Gambling, a major cash cow for governments all over Canada, ruins an untold number of families every year.

The same can be said for the liquor imbibed by Canada’s one million alcoholics, every drop of which is taxed by provincial and territorial legislatures. He argued that tobacco is somehow a special case.

What he means is that tobacco makes for a more politically attractive target. Alcohol and gambling are no different than tobacco, except they are more popular with voters. It would be more politically damaging to go after the companies that provide them, so politicians leave them be.

Governments should just admit they are as hopelessly addicted to tobacco as any smoker, and end their duplicitous attempt to look pious on smoking while at the same time reeling in billions annually.


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