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Increased Taxes Drive Down Tobacco Sales

Calgary Herald – June 27, 2008 – Michelle Lang

Reduced revenues replaced by more drinking, gambling

Higher tobacco taxes are discouraging Alberta smokers from lighting up, but gamblers and drinkers are making up for any lost revenue, according to new government figures.

The Alberta government’s annual report, released Tuesday, said provincial coffers collected about $845 million in tobacco taxes during 2007-08 — $45 million less than the budgeted amount — because of “lower than anticipated sales.”

Anti-tobacco advocates hailed the statistic as a turning point for smoking in the province and attributed the change to a 16 per cent increase in tobacco taxes, announced last year, as well as recent anti-smoking legislation.

Action on Smoking and Health said Alberta has seen a six per cent decline in smoking during the past year, noting tobacco sales dropped by about 137,000 cigarettes at the same time the province’s population increased.

“It’s the first drop in consumption in five years in Alberta,” said Les Hagen of Action on Smoking and Health, an anti-tobacco lobby group.

“It means we’ve turned an important corner in tobacco reduction.”

Despite the drop in sales, government still collected about $70 million more in revenue from tobacco, compared with 2006-07, because of the tax increase.

Tuesday’s statistics follow the province’s decision in the spring 2007 budget to boost tobacco taxes by about 63 cents per pack. The increase made Alberta’s cigarettes among the most expensive in Canada.

Last fall, Alberta passed tobacco legislation that introduced a sweeping smoking ban in all public and work places as of Jan. 1.

Representatives with the Alberta Alcohol and Drug Abuse Commission said Tuesday they weren’t surprised by statistics showing a drop in sales, noting higher taxes are closely linked with lower smoking rates.

“It’s one time when we’re delighted with a reduction in revenue,” said Sue Lysachok of the commission.

While tobacco sales are dropping, however, sales of liquor and gaming revenues are growing in Alberta.

The province’s annual report said gaming and lottery revenue have increased from $1.5 billion in 2006-07 to $1.6 billion during the past year.

Liquor revenue increased from $658 million to $678 million over the same period.

Alberta Finance officials said the province’s population boom is likely boosting gambling and liquor revenues.

A spokesperson with the Alberta Gaming and Liquor Commission said the province’s strong economy may also play a role in the higher revenues, with Albertans having more disposable income to spend on entertainment such as gambling.

Robert Williams, a University of Lethbridge professor and a co-ordinator with the Alberta Gaming Research Institute, said the growing number of casinos around the province is partly responsible for the increase.

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