“We’ve recently seen an increase in the level of illegal activities related to tobacco,” said Provincial Tax Commissioner Jim Ramsay. “Our estimates indicate that at least $3.9 million of tobacco tax revenue is lost annually as a result of illicit tobacco.”

“This legislation will improve our ability to deal with this problem,” Ramsay added. “It expands the definition of inspectors to include RCMP and municipal police officers and allows them greater authority to search for and seize evidence. It also sets out much larger fines for each offence, as well as additional fines equal to five times the tax due had it been sold legally. Of course, anyone breaking this law could also face various terms of imprisonment.”

Provincial Treasurer Wes Sheridan believes the new legislation will have a significant impact on provincial revenues. “We all wish that we were seeing a dramatic drop in tobacco tax revenue because fewer Islanders are smoking but, in truth, it’s mostly the result of illegal activities,” he said. “In other provinces, the illicit tobacco trade is responsible for a 25 percent drop in tobacco tax revenues. Here on PEI, the losses have not been that dramatic, in part, because we have been working closely with the RCMP to increase the enforcement of existing laws. We're very aware that any revenue lost to illegal activities represents an unfair burden on all Island taxpayers.”

Jim Ramsay also pointed out that the illegal tobacco trade not only affects the collection of taxes, but has serious health consequences as well. “The cigarettes that we’re finding have been produced in unregulated environments, so they may contain contaminants that would not be acceptable in commercially-produced tobacco,” said Ramsay. “They also have not passed fire regulations, making their use much more hazardous.”

The province is forming a coordinating committee. “We’re partnering with all the organizations that are involved with the enforcement of tobacco regulations, including local police, the RCMP, the Department of Health and the Canada Revenue Agency,” said Ramsay. “We want to make sure everyone involved is well informed and working together.”

This new legislation has been introduced at a time when the province is also reviewing other regulations around the use of tobacco on the Island. “Cracking down on illicit tobacco is just another example of the way that this government is showing its commitment to protecting the health of Islanders,” said Sheridan.

BACKGROUNDER ON TOBACCO LEGISLATION

The main provincial statutes which deal with tobacco fall under the Provincial Treasury and the Department of Health. Within Health there are two main pieces of legislation, the Smoke Free Places Act which deals with smoking restrictions in public places and the Tobacco Sales and Access Act which dictates restrictions surrounding the sale and promotion of tobacco. The Provincial Treasury is responsible for the Health Tax Act, which includes legislation on the taxation of tobacco and licensing for the sale of tobacco, as well as alcohol. The new Tobacco Tax Act will replace all tobacco-related legislation and regulations that are currently under the Health Tax Act. Prince Edward Island’s former legislation on tobacco tax was not consistent with similar acts in other jurisdictions, and the new Act more closely resembles the laws across Canada.

Following are some key elements of the Tobacco Tax Act:

• Includes RCMP and municipal police officers in the definition of inspectors providing them with the authority to enforce the Act (as amended in the Revenue Tax Administration Act);

• Sets out various offences relating to the sale, purchase, possession, marking and transportation of tobacco;

• Allows inspectors, upon reasonable grounds and with a warrant, to enter premises and vehicles to search for evidence of a contravention of the Act;

• Allows inspectors, upon reasonable grounds and without warrant, to stop, detain and search vehicles believed to contain illegal tobacco products;

• Allows the court to consider illegal possession by one person to be in possession of other persons as well, if they have knowingly acquiesced to the illegal possession;

• Creates an offence for the contravention of the Act and establishes various punishments including:

- fines up to $10,000 for a first offence, $50,000 for a second offence and up to $100,000 for a third offence,

- various terms of imprisonment, and

- an additional fine equal to five times the tax due if it had been purchased by a consumer liable to pay the tax;

• Provides for a term of imprisonment for anyone who defaults in the payment of a fine;

• Indicates that every sale, purchase or transaction in contravention of this Act is a separate offence and the imposition of a fine does not affect the recovery of tax due; and

• Provides that where a corporation commits an offence, the officers and directors of the corporation are party to and guilty of the offence if they directed, authorized or assented to the offence.

For the complete text of the Tobacco Tax Act please visit our website www.taxandland.pe.ca or contact Taxation and Property Records Division at (902) 368-4161.