Canada - study finds the tobacco tax decrease implemented in February 1994 had no impact on tobacco consumption or promotion..

In 1994, Canada reduced tobacco taxes in response to concerns about smuggling, causing the real price of cigarettes to fall by one-third. Teenage smoking increased from 16% to 20% A HEC MontrDeal 1994-1995 Statistics Canada Survey on Smoking in Canada found that the major tax decreases implemented in February 1994 had no significant impact on tobacco consumption or promotion, even among the youth.

In comparing the evolution of tobacco use in the five provinces having decreased taxes and the five who did not in 1994, Statistics Canada was never able to detect the slightest significant difference, proving beyond a shadow of a doubt that decreasing taxes has no effect. In certain cases, it was even observed that provinces where taxes were not lowered saw a weaker decrease in rates of tobacco use than other provinces. "The time has come to put this myth to rest and to decrease excessive tobacco taxes in order to eliminate once and for all, and as quickly as possible, the scourge of contraband tobacco endured far too long because of the unproven and unfounded fear that it would encourage people to smoke. For this, the contraband market is currently doing fine on its own by selling cheap cigarettes to kids in high school courtyards."

After thoroughly examining the data collected from the 12,000 Canadians who participated in this major survey, Jean-FranEcois Ouellet, associate professor at HEC MontrDeal concludes that "based on the data collected by Statistics Canada, randomness is as good a way as any in determining if a Canadian will change his smoking patterns based on decreased tobacco tax. Particularly noteworthy, the absence of difference is observed equally in the general sample population as in the youth respondent population." The study can be downloaded at .

In another Canadian study it was found that young adults are sensitive to cigarette prices. Reductions in cigarette prices will lead to increased smoking initiation among this group. It was concluded that tobacco taxation should be an effective strategy to reduce smoking initiation among young adults.

Reference: Major tobacco tax reduction in 1994: No impact on smoking rate says HEC MontrDeal, CanadianBusiness.com, 1/13/2010.