Higher tobacco and vaping taxes offset drug-plan spending

OTTAWA — The federal government expects that its latest effort to discourage Canadians from smoking, contained in the federal budget tabled Tuesday, will generate $1.7 billion in new revenue.

That increased cash flow happens to coincide with the launch of a new $1.5-billion drug plan offering universal coverage for contraceptive and diabetes medications.

Both programs were billed as new health measures in the budget tabled Tuesday in the House of Commons by Finance Minister Chrystia Freeland.

Health Minister Mark Holland announced the launch of a new pharmacare program in February, following fraught negotiations with the New Democrats.

The NDP urged the government to cover several categories of drugs as the Liberals pushed back on the cost, citing a “challenging fiscal framework.”

Holland was reticent to share the cost of the program at the time, and said the price tag was likely to change based on negotiations with provinces and territories.

As it stands, the government plans to spend $59 million over the next year, and increase annual spending to $477 million by 2027. “Free contraceptives are central to a woman’s right to control her own body. That is a fundamental woman’s right,” Freeland said in her budget speech. “It is a fundamental human right.”

The new costs will be entirely offset by renewed efforts laid out in the budget to discourage people from smoking and vaping.

The tax hike comes a month after Holland all but declared war on tobacco and nicotine companies that market to children during a press conference outside of Parliament.

“Whatever dark corner the tobacco industry crawls and creeps into to go after our children, wherever they go, whatever loophole they think they can find, they will meet me like an iron wall,” he said at the time.

The government plans to increase the excise tax on a carton of cigarettes by $4 starting Wednesday which, in addition to the automatic inflation increase of $1.49, the Liberals expect will bring in $1.36 billion over five years.

Physicians for a Smoke-Free Canada estimates the average cost of a pack of cigarettes in Canada is $13.22, based on wholesale prices plus a 10 per cent markup.

The tax on vaping products will increase by 12 per cent in July, and bring in $310 million over five years.