Big Tobacco Absorbs Fines

Source from:  thechronicleherald.ca Tue. Aug 5 08/06/2008

CONSIDER it lite, filtered justice. As impressive as the $1.1 billion in penalties levied against two big Canadian tobacco companies last week sounded – Imperial Tobacco Canada and Rothmans Benson & Hedges both agreed to plead guilty to violating the federal Excise Act – the reality is the penalties represent a fraction of the cost of the harm inflicted on society by these firms. First, the context. In the late 1980s and early 1990s, Ottawa tried to stem smoking rates by increasing cigarette taxes. In response, at least some big cigarette makers exported their product to the U.S. tax-free, then helped to smuggle the tobacco back into Canada, where it then could be sold at a deep discount. Tobacco firms made huge profits, Ottawa lost billions in unpaid taxes and, critics say, countless young people, lured by cheaper smokes, got hooked on nicotine. Observers say the tax losses of the federal government alone dwarf the legal settlement. Moreover, Ottawa, stung by the struggle to control rampant tobacco smuggling, eventually had to lower taxes again. Those sin taxes are now back to high levels, but Canadian authorities again have to contend with serious smuggling problems, this time from foreign manufacturers and believed to be controlled by organized crime. What of the ultimate health costs of those new smokers recruited by tobacco companies in the late 1980s and early 1990s? As Garfield Mahood of the Non-Smokers Rights Association put it, each will now serve as a "lifetime annuity" for cigarette makers. Little wonder reaction to the record fines against Imperial and Rothmans was mixed. National Revenue Minister Gordon O'Connor hailed the judgment as sending a clear message our tobacco tax laws will be enforced and smuggling fought. Others, however, were understandably less impressed. Why weren't tobacco executives charged? they wondered. Given the gravity of the offence – thwarting Ottawa's efforts to price a toxic substance out of the affordable reach of many people, in an effort to hook them on something that will likely eventually kill them – making company executives personally liable would have sent a much stronger, much clearer message. The federal government turned around and put $300 million of the fines into a buyout program for Ontario tobacco farmers looking to quit the business, but even there they've fallen short. Tobacco growers say they'll need a billion to realistically convince people to switch to new crops. Even Ottawa's boast the tobacco firms will help fight smuggling has been undercut by suggestions the companies are motivated not by altruism but a desire to stifle foreign competition. Enditem