Big Tobacco urges Canada to ensure legal nicotine competitive with black market
Jorge Araya, president and CEO of Imperial Tobacco Canada, fields questions following a speech about the inconsistencies in the regulatory approaches between tobacco and marijuana Thursday, November 9, 2017 in Montreal. (THE CANADIAN PRESS/Paul Chiasson)
Published Thursday, November 9, 2017 8:00PM EST
MONTREAL -- If the price of legal marijuana must be competitive with the black market in order to discourage underground sales, then the same logic should apply to nicotine, the head of Imperial Tobacco Canada said Thursday.
Governments across Canada are preparing for marijuana's legalization in 2018 and are creating legislative frameworks to regulate the industry.
Bill Blair, the federal MP tasked with leading the drug's legalization in Canada, has said the provinces generally agree legal marijuana should cost roughly the same or lower than what can be found on the street.
That same rationale should apply to nicotine products, said Imperial Tobacco's Jorge Araya.
Imperial isn't lobbying for lower taxes for traditional cigarettes but is against future increases as well as the federal government's plan to require plain and standardized packaging, he said.
Araya, who says he doesn't smoke, is also lobbying for a competitive tax regime for what he calls "less-risky" nicotine products such as heated tobacco and electronic cigarettes, which he says represent the future of the industry.
"The first step is to stop tax increases provincially and federally because we are getting to a level where illegal tobacco is booming in the country," Araya said in an interview after a speech organized by Quebec's main employers association.
About 70 per cent of the price of a pack of cigarettes is taxes, he said, and the illegal market in Canada represents 25 per cent of sales and billions a year in lost revenue for governments.
"We will always advocate for very high taxation with (traditional) cigarettes," he said. "We have to pay for the externalities and health impacts that we create -- what we don't want is to go higher than we are today."
Imperial Tobacco supports Bill S-5, which is making its way through the Senate and would legalize nicotine-containing vaping products in the country.
But Araya said the company is against the provision forcing companies to have plain and standardized packaging for cigarettes because that would hinder the consumer's ability to differentiate between products and with the black market.
Sindy Souffront, spokesperson for Health Canada, explained in an email that vaping products, including e-cigarettes and e-liquids that contain nicotine, require authorization from Health Canada before they can be imported, advertised or sold in Canada.
"To date, no such products have been approved," she said. "Under Bill S-5, manufacturers and importers of a vaping product containing nicotine would not be required to seek Health Canada approval, provided that the product does not make therapeutic health claims."
Imperial Tobacco has started selling a small machine that heats tobacco to release nicotine as opposed to burning it, which emits fewer toxicants.
The company also want to be able to sell liquid nicotine inside electronic cigarettes, Araya said.
"What we want is to sit down with government and look at all nicotine products and reach an agreement on how to treat taxation in a very sustainable way," Araya said.
A Quebec anti-tobacco coalition says it is misleading to treat tobacco like marijuana because tobacco is tied to tens of thousands of deaths a year, unlike pot.
Flory Doucas, the group's spokesperson, said "the goal of (Araya's) speech was to rally the business community to the defence and interests of cigarette companies by stoking fear regarding new anti-tobacco measures and to publicize their new products."
While Imperial Tobacco lobbies the government on regulation, it is also waiting for a major court ruling that could force the company to pay hundreds of millions of dollars to smokers.
In 2015, a Quebec judge ordered three major cigarette companies, including Imperial Tobacco, to pay $15 billion to smokers in what is believed to be the biggest class-action lawsuit ever seen in Canada.
The companies made arguments to the Quebec Court of Appeal about a year ago and are awaiting a decision.
Araya said his company isn't ruling out going to the Supreme Court of Canada if it loses an appeal.
"Yeah, that's one of the avenues, to go to the Supreme Court," he said. "But at the moment that would be speculation. We are very confident about the strength of our arguments."