Tax policy to address tobacco market failures

Tobacco tax increases are the biggest single factor in the recent drops in Canadian per capita cigarette consumption, which has declined by roughly 20% since the most recent cycle of tax increases began in 2001. Indeed, it is no exaggeration to say that tax policy is the cornerstone of Canadian tobacco control policy. However, some aspects of present government policy do unintentionally reinforce problematic features of the present tobacco market, and should be adjusted accordingly. This paper discusses various tax policy options that could address these features.