First Nations People and Tobacco Taxation
First Nations
and
Inuit Peoples
of Canada
and
Tobacco Taxation:
A Discussion Document
Prepared for:
the First Nation and Inuit
Health Branch of Health Canada
and the National Cancer
Institute of Canada
April 29, 2006
1
First Nations People and Tobacco Taxation
Rob VanWynsberghe PhD
2
First Nations People and Tobacco Taxation
Executive Summary
Despite declining smoking rates amongst the general population in
Canada, tobacco consumption by First Nations and Inuit people
remains alarmingly high. Smoking-attributable mortality among First
Nations people is very similar to the general population due to nonsmoking cause of mortality (i.e., injuries). This paper explores the
potential for using on-reserve tobacco taxation as a means of
promoting smoking cessation in Aboriginal communities in Canada.
Most of the evidence suggests that increased price of tobacco products
brought about by taxation can be an effective deterrent to the onset of
smoking and an incentive for smoking cessation. As well, revenue
generated from tax increases can be used in smoking cessation
programs and for health care. This paper also examines some of the
impediments in implementing on-reserve tobacco taxation, such as
perceptions of Aboriginal tax immunity and tobacco smuggling.
Although further research is needed, in particular on tobacco taxation
strategies already in use in Aboriginal communities in Canada, the
evidence suggests that tobacco taxation can be an effect component of
comprehensive anti-smoking campaigns.
Acknowledgements
I would like to thank the following people for their generous time and
aid in producing this document. Dr. Dennis Wardman, Community
Medicine Specialist with the First Nations and Inuit Health Branch
conceptualized thisresearch. Ken Medd, Senior Tax Policy Officer with
Finance Canada provided encyclopaedic knowledge of First Nation
taxation. Scott Uzelman, Ph.D Candidate, in York University’s Graduate
Program in Communication and Culture provided important editorial
help and Aileen Penner MA, was instrumental to early circumscribing
this complex that made this scoping paper possible. Finally, my
partner, Samia Khan, PhD, read several drafts and asked all the right
questions.
3
First Nations People and Tobacco Taxation
Table of Contents
Executive Summary……………………………………………………………………….. ii
Table of Contents………………………………………………………………............ iii
Preamble …………….…………………………………………………………………….….. 1
Objectives……………………………………………………..……………………………….. 2
Scope and Delimitations of the Paper…………………….…………………….. 2
1. A CANADIAN PROFILE OF TOBACCO CONSUMPTION AND
ASSOCIATED HEALTH RISKS……….……………………………………………….. 4
2. ABORIGINAL SMOKING RATES AND HEALTH IMPACTS…………….6
SUMMARY OF ABORIGINAL SMOKING RATES AND HEALTH
IMPACTS…………………………………..…..……………………………………………….. 8
3. FACTORS RESPONSIBLE FOR HIGH RATES OF TOBACCO
CONSUMPTION……………………………………………………………………………….. 9
4. TAXATION AND TOBACCO CONSUMPTION AMONG ABORIGINAL
GROUPS AND THE GENERAL
POPULATION…………………………………………………………………………….……..10
5. YOUTH SENSITIVITY TO PRICE…………………………………………………. 13
6. IMPACT OF TOBACCO USE ON MORTALITY………………………………. 14
7. TAXATION AND TOBACCO CONSUMPTION: EVIDENCE TO THE
CONTRARY………………………………………………………..……………………………. 15
SUMMARY OF TAXATION AND TOBACCO CONSUMPTION AMONG
ABORIGINAL GROUPS AND THE GENERAL POPULATION……………… 17
8. TAXATION: IMMUNITY, ARRANGEMENTS, and ISSUES.......... 18
9. INDIAN ACT AND PERCEPTIONS OF TAX IMMUNITY……………… 18
SUMMARY OF INDIAN ACT AND PERCEPTIONS OF TAX
IMMUNITY…………………………………..…..…………………………………………….. 21
10. SPECIFICS OF TAXATION AGREEMENTS………………………………… 21
11. FIRST NATIONS SALES TAX (FNST).................................... 22
12. FIRST NATIONS GOODS AND SERVICES TAX (FNGST)…………. 24
SUMMARY OF FNST AND FNGST………………………………………………
25
4
First Nations People and Tobacco Taxation
13. SMUGGLING AND DOWN THE ROAD SALES…………………………… 26
14. REVENUE GENERATION…..………………………………………………………. 27
SUMMARY OF ISSUES REGARDING TAXATION AS A SMOKING
CESSATION STRATEGY…………………………………………………………………… 28
RECOMMENDATIONS FOR FURTHER RESEARCH, POLICY, and
COMMUNITY…………………….……………………………………………………………… 29
15. IMPORTANCE OF COMPREHENSIVE APPROACH……………………… 29
16. CASE STUDY RESEARCH ON THE HEALTH IMPACTS OF
IMPLEMENTING TAXATION AGREEMENTS, RAISING REVENUES, AND
ESTABLISHING TOBACCO MISUSE IN ABORIGINAL COMMUNITIES
……….………………………………………………………………………………………………. 31
17. INTERCOMMUNITY COLLABORATION……………………………………… 32
18. CANADIAN ABORIGINAL COMMUNITIES AS ROLE MODEL……. 33
OVERALL SUMMARY OF THE WHOLE REPORT………………………………..33
REFERENCES…………………………………………………………………………………… 36
List of Tables
Table 1. Section 87 of the Indian Act…………………………………………….19
Table 2. What the Native Leaders Say……………………………………………20
INTRODUCTION
PREAMBLE
If on-reserve tobacco products were taxed by 7%, the number of
aboriginal smokers who will quit will be approximately 39,000 and the
revenue generated could potentially be over 75 million per year.1 This
report discusses the use of tobacco taxation as a method to reduce the
consumption of tobacco products (cigarettes, snuff, pipes, chew, and
cigars) in First Nations and Inuit communities. In doing so, the
5
First Nations People and Tobacco Taxation
possibilities and problems associated with taxation of tobacco products
are reviewed. The report will also address the following questions:
What is the extent of the Aboriginal and Inuit tobacco-related health
problems and can taxation help? What evidence supports tobacco
taxation as a mechanism for reducing smoking among First Nation and
Inuit populations and fostering healthier communities? How will
taxation impact the growing and complicated problem of aboriginal
smoking, especially among aboriginal youth? What are the issues and
conflicts that can be anticipated in First Nation and Inuit communities’
using taxation to stop the misuse of tobacco? Given both the positive
outcomes and potential conflicts, what are some ways that taxation
could be implemented?
6
First Nations People and Tobacco Taxation
OBJECTIVES
The objectives of this paper are:
1. To delineate factors relevant to considering taxation as a smoking
cessation strategy among First Nations and Inuit populations in
Canada.
2. To review studies on tobacco use in Canada and research on
smoking cessation through taxation among First Nation and Inuit
populations in Canada.
3. To sketch existing First Nation-government arrangements for
introducing taxation as a smoking cessation strategy.
4. To synthesize the existing evidence on the above and to provide
broad recommendations for community members, health practitioners,
policymakers, and funders.
SCOPE AND DELIMITATIONS OF THE PAPER

It is acknowledged that making any conclusions about the
impact of tobacco use is complicated by the general health
status of First Nations and Inuit people in Canada, which is
negatively impacted by relatively poor socio-economic status,
lack of access to quality health care, and poor physical
infrastructure and environmental factors.
7
First Nations People and Tobacco Taxation

It is acknowledged that tobacco use by many Aboriginal
peoples is rooted in traditional religious and medicinal practices.2

It is acknowledged that the addition of chemicals to tobacco
and high rates of consumption mean that contemporary tobacco
consumption is different and more dangerous than traditional
uses.

It is acknowledged that Western medicine and traditional
Aboriginal medicine are based on radically different worldviews
about what causes addictions and illness, and what good health
means.

It is acknowledged that this report is mainly situated in the
peer-reviewed world of research articles and government
documents. These reports largely assume that First Nations and
Inuit people are unique sub-populations. We recognize that it is
incorrect to assume that all people who share a First Nations or
Inuit identity also share the same culture. However, for the
purposes of this paper we do so. No disrespect is intended.

It is acknowledged that to the extent that tobacco use itself is
a choice, we see it as a product and a practice that is linked to a
particular culture. We take an expansive view of health
promotion, which argues that a new cultural context of
sovereignty, built capacity, and infrastructure will alter
behaviour, attitudes, beliefs, and customs associated with
tobacco use.
8
First Nations People and Tobacco Taxation
1. A CANADIAN PROFILE OF TOBACCO CONSUMPTION AND
ASSOCIATED HEALTH RISKS
Over the past forty years, tobacco use has declined significantly
amongst the general population in North America (Reading, 1996,
p.97). More recently, a national Canadian survey by Health Canada in
2000 indicates that the smoking rate declined by 7% nationwide, from
30% to 23% in the period between 1990 and 2000 (Health Canada,
2000, p.52). A 2003 Health Canada survey found that the rate of
tobacco consumption has fallen again to approximately 21% since
2000.
However, approximately 5 million Canadians (aged 15 years and older)
still smoke and, according to the 2003 Canadian Tobacco Use
Monitoring Survey (CTUMS) survey (see Reference List for url), the
most recent profile of the average smoker is as follows:

Smokers consume about 16 cigarettes on a daily basis (down
from 20.6 in 1985).

Men continue to smoke more cigarettes than women (17.3
cigarettes per day for males as compared to 14.0 for females).

23% of Canadian men were current smokers and approximately
18% of women smoked in 2003.

58% of Canadian smokers reported consuming "light" or "mild"
cigarettes compared to 42% who smoke a "regular" type of
cigarette.
In short, the average Canadian smoker is part of a decreasing
minority, somewhat more likely to be male than female, who smokes
about a pack a day of light or mild cigarettes (Health Canada, 2003)..
9
First Nations People and Tobacco Taxation
Despite a reduction in numbers of smokers and cigarettes smoked per
day the health problems associated with tobacco consumption persist.
A 2002 foreword to a report by the Federal Tobacco Control Strategy
(see Reference List for url), presented some startling statistics about
the effects of smoking in Canada:

Tobacco use is the single most preventable cause of premature
death and disease.

Tobacco use costs in excess of $3.5 billion in health care
annually.

Non-medical costs (e.g. worker absenteeism, residential fires
and lost future income from smokers’ premature deaths) raise
the annual economic burden of tobacco use to at least $15
billion.

Every ten minutes, two Canadian teenagers start smoking
cigarettes.

Every 11 minutes, a person in Canada dies from tobacco use.

Each year, more than 1000 Canadians die from second-hand
tobacco smoke.

Every year, more than 45,000 Canadians die because of tobacco
use, more than five times the number of Canadians who die from
traffic injuries, alcohol abuse, murder and suicide combined.
The Aboriginal Non-Smoker’s Rights lists a host of health risks of
regular tobacco use including:

Pneumonia, cold, and flu

Chronic bronchitis, emphysema and asthma

Cancers, including the lung, throat, cervix, pancreas, kidney,

High cholesterol (LDL)

High blood pressure
10
First Nations People and Tobacco Taxation

Coronary heart disease (e.g., heart attacks)
Clearly, tobacco use is related to a number of health risks. In fact, it
is responsible for 45,000 deaths a year. In addition, the costs to the
public are enormous, nearly $20 billion a year in medical and nonmedical costs.
2. ABORIGINAL SMOKING RATES AND HEALTH IMPACTS
As daunting as the above statistics are, they are not reflective of the
Aboriginal situation in this country, where the statistics are worse. In
addition, the average Aboriginal smoker has a different profile and this
is important because it bears on whether taxation is more or less
potentially useful.
The Canadian Tobacco Use Monitoring Survey (Health Canada, 2003),
showed that tobacco use by First Nations and Labrador Inuit is very
high (see endnote 1 for Aboriginal population and smoking rate
calculations). Approximately two-thirds of Aboriginal adults reported
smoking in 2002 (Health Canada, 2003). Numerous studies, going as
far back as 1980, have been cited by Reading et al (2002, p. 98) in
linking Aboriginal people to higher rates of smoking than nonAboriginal populations.3 This means that the smoking rate sits
somewhere between 60 and 70 percent for Aboriginal people. This rate
has been consistent for 25 years or more even in the face of massive
public health efforts, such as media campaigns, to control tobacco
consumption in Canada.
11
First Nations People and Tobacco Taxation
First Nations and Inuit populations appear to have magnified health
impacts from tobacco use that are exacerbated by socio-economic
factors. Health Canada notes that First Nations people living on
reserve have much higher rates of stroke (40% higher) and heart
disease (60%) in comparison with the general Canadian population. As
well, Inuit women have some of the highest rates of cancer in the
world (Health Canada, 2000, p.52). These health risks are linked to
high rates of tobacco use puts by Aboriginal people. Amongst First
Nations people in BC, smoking-attributable mortality was similar to to
the rest of British Columbians. The lower than expected smokingattributable mortality most likely reflects a higher rate of non-smoking
related mortality, such as injuries (Wardman & Khan, 2004a). Most
seriously, in an Australian study, Unwin et al. show that tobacco
smoking was responsible for 15.4% of deaths in the general population
and 13.9% of Aboriginal deaths. The study also found that of those
who died as a result of tobacco use, 49% of Aboriginal males and 48%
of Aboriginal females died before 55 years of age, compared with 11%
and 10%, respectively, in non-Aboriginals (Unwin et al. 1995). Plainly,
the high rate of tobacco consumption by Aboriginal people is linked to
serious and widespread health risks.
Tobacco use may have some indirect health consequences as well.
Evidence suggests that the use of tobacco may lead to drug and
alcohol experimentation, gambling and other unhealthy behaviours.
The Nechi Institute, an Aboriginal education, research and health
promotion centre, reports that graduates of their alcohol and drug
treatment programs began smoking at an early age with some 80% of
Aboriginal female adult smokers and 60% of Aboriginal male smokers
beginning to smoke between the ages of 11 and 15 (Nechi Institute,
12
First Nations People and Tobacco Taxation
1992 as cited in Reading et al, 2002, p.105). Thus, tobacco use also
has serious indirect health impacts for Aboriginal people, seemingly
connected to drug and alcohol use as well as gambling.
Aboriginal youth are a susceptible sub-category of the Aboriginal
population whose average age and rates of tobacco consumption is
significant and noteworthy. In Canada, the First Nations Youth Inquiry
into Tobacco Use (Wunska, 1997, p.116) confirms that tobacco
smoking is a serious public health problem among youth and suggests
that cessation and prevention efforts should begin at 10 years of age.
The implication is that Aboriginal people are consuming tobacco
products at a young age, which in turn magnifies negative health
outcomes by increasing the lifetime exposure to the harmful
substances in tobacco.
This concern is shared in findings of research about Australian
Aboriginal youth. Sweet (2002) conducted focus groups where the
adult Aboriginal respondents explained that Australian Aboriginal
children typically started smoking at age 9 or 10, and sometimes as
young as 6. The evidence suggests that Aboriginal youth are at risk
generally for long-term tobacco use and addiction.
SUMMARY OF ABORIGINAL SMOKING RATES AND HEALTH
IMPACTS
Although smoking rates among the general Canadian population are
steadily declining, the negative impact on health, productivity and
well-being of smokers is still high. Despite public health efforts,
13
First Nations People and Tobacco Taxation
Aboriginal rates of tobacco consumption remain disproportionately
high. This continues to render Aboriginal adults and youth susceptible
to a host of health impacts such as stroke, heart disease and cancer
leading to death.
3. FACTORS RESPONSIBLE FOR HIGH RATES OF TOBACCO
CONSUMPTION
Unique factors or combinations of factors may contribute to the
disproportionately and sustained rates of tobacco use amongst First
Nations and Inuit people, and especially youth. Social acceptance of
smoking in Aboriginal communities, whether out of habit or for
recreational purposes, and the widespread availability of tobacco could
account in part for high rates of tobacco use (Reading et al, 2002,
p.97). It is important to note that tobacco has a cultural history among
First Nations people, likely increasing its acceptance (see endnote
two). In addition, for those without a lot of money, consuming tobacco
products might be considered an affordable indulgence. For youth
especially, social inclusion, peer group practices, role models, and agerelated experimentation might be relevant factors in initiating tobacco
use. As well, studies have shown that North American smoking rates
are highest among lower-income groups (Chen, 1993) and groups with
lower levels of education (Government of Yukon, 1994). It appears
that smoking tends to be more prevalent in minority populations who,
in turn are more likely to suffer from low socio-economic status
(Bartecchi et. al., 1994). A study of the general population in the
Yukon compared several factors – employment pattern, level of
education, income level and ethnicity – among tobacco users
14
First Nations People and Tobacco Taxation
(Government of Yukon, 1994). The study found that Aboriginal people
had the highest rates of smoking and that socioeconomic status is
likely the primary factor in whether or not a person uses tobacco
(Reading et al, 2002, p.106). Socio-economic status, social acceptance
and inclusion, peer pressure, and low levels of education are all factors
in making tobacco use more prevalent for Aboriginal peoples.
4. TAXATION AND TOBACCO CONSUMPTION AMONG
ABORIGINAL GROUPS AND THE GENERAL POPULATION
There are very few studies that examine the effectiveness of smoking
cessation techniques among Aboriginal populations. In Australia, Ivers
(2004) looked at the effectiveness of advice by heath professionals as
well as the use of nicotine replacement therapy in lowering tobacco
consumption among Australian Aboriginals. He noted that little is
known about whether such interventions are appropriate and effective
for Aboriginal Australians. Because evidence from systematic reviews
in other populations may not be directly transferable to Aboriginal
people, Ivers concludes that further research is required to assess the
effectiveness of tobacco cessation strategies for Aboriginal people
(Ivers, 2004). In the current state of research on this topic, there is a
need for specific studies assessing the effectiveness of specific
Aboriginal smoking cessation strategies. Additionally, the available
evidence suggests that significant differences among Aboriginal
communities exist with respect to tobacco consumption and this makes
research in particular, unique communities important.
15
First Nations People and Tobacco Taxation
There are also only a few studies exploring the impact of increased
pricing on Aboriginal rates of tobacco use, but what the research tells
us about the impact of taxation on tobacco use in the general
population is illuminating. Numerous studies indicate that higher
tobacco prices are associated with lower tobacco consumption (Levy et
al., 2000; Sweanor et. al, 2000). Consumer demand for tobacco, like
all commodities, tends to fall as price rises. This empirical evidence
suggests that higher tobacco taxes can be an effective means of
reducing smoking and tobacco consumption, and as a result, tobaccorelated deaths and illness.
Evidence of the relation between price, taxation and tobacco
consumption has been particularly compelling in Canada over the past
twenty years. Sweanor et. al. (2000, p.168) present a graph that
shows the relationship between cigarette consumption and price in
Canada. The 1980s saw a rapid increase in the price of cigarettes due
to several large tax increases. Between 1982 and 1991, the price of a
pack of cigarettes (adjusted for inflation) rose on average from
approximately $2.10 to about $5.40 (Sweanor et al., 2000, p.169).
The rapid increase in price brought about by tax increases was
accompanied by significant declines in the rate of smoking. During the
same time period, tobacco consumption declined by about 40% among
adults and approximately 60% among youth aged 15 to 19 (Sweanor
et al, 2000, p.169). By comparison, the decrease of tobacco
consumption among Canadians was much more rapid than the US –
per capita cigarette consumption by those aged 15 and older fell by
42% in Canada versus 26% in the US from 1982 to 1992 (Sweanor et
al, 2000, p.168). These declines in Canada have translated into an
overall increase in cessation, moving the smoking rate from
16
First Nations People and Tobacco Taxation
approximately 40% in 1981 to 31% in 1991. The decline in the youth
smoking rate (15 to 19 year-olds) was even more pronounced, from
44% to 22% (Sweanor et al, 2000, p.169). Overall, this data suggests
a clear relationship between tobacco price and smoking rates in
Canada.
Although the influence of tax increases on cigarette use is complex
(Levy et al., 2000), there is clear evidence of a trend towards lower
rates of tobacco consumption as price increases. For example, a study
in California examined the relative effectiveness of a $0.25 per pack
increase and an anti-smoking media campaign. Hu et al. (1995)
concluded that a tax (tax or price) increase reduced cigarette sales by
819 million packs over a two year period. By contrast, the antismoking media campaign reduced sales by 232 million packs over the
same period (Hu et al, 1995). Similarly, Green (1997) noted that
when “real disposable income is held constant, per capita cigarette
consumption tends to fall by 0.5% for every 1% price” (p.2).
Moreover, these effects tend to increase over time. Using similar
figures, Sweanor et. al (2000) suggest that a 10% increase in the cost
of cigarettes would result in a 4% decrease in consumption in the
short term and a 8% decrease in the long term (p.166).4 Theoretically,
one could extrapolate from the above and suggest that significant
price increases would lead to a stop in tobacco product consumption.
The evidence data below suggests that other factors must be
accounted for.
At the same time, it should be emphasized that the effect of a tax
increase on cigarette use depends on a number of related factors,
including the reaction of manufacturers, how long the tax is in effect,
17
First Nations People and Tobacco Taxation
and the inflation rate. Manufacturers have successfully lobbied against
tax increases, arguing that higher tobacco taxes could, over time, lose
their impact on consumer behaviour. Moreover, they argue that if the
tax is implemented in inflationary times, smokers could have less
discretionary income to begin with and thus smoking rates would
decline “naturally.” Furthermore, others have noted that the effects of
a tax may vary over time because of different smoking rates by
different social segments and because of greater responses to price
changes by youth. Evidence suggests that the effects of price
increases on smoking rates for lower income groups will be more
pronounced (Gruber et al., 2003; Colman & Remler, 2004). Thus there
are a number of factors complicating the relationship between taxation
and tobacco use.
A general lack of studies on smoking cessation via taxation in
Aboriginal groups exists. Non-Aboriginal evidence suggests that age,
disposable income, manufacturer responses to tax, duration of
taxation, and the inflation rate are relevant determining factors in
tobacco use. Yet there is evidence that suggests that cost is positively
associated with reducing tobacco consumption.
5. YOUTH SENSITIVITY TO PRICE
Significant evidence suggests that young people are particularly price
sensitive with respect to smoking given that they tend to have lower
levels of disposable income than adults (Grossman & Chaloupka,
1997). Ding (2003), for example, shows that a 10 percent increase in
price resulted in a 14 percent decrease in smoking among youth.
18
First Nations People and Tobacco Taxation
Based on a review of the empirical evidence regarding the
effectiveness of economic tobacco control measures, Liang et al.
(2001) conclude that the most consistent finding in the literature
suggests that higher cigarette prices discourage youth smoking.
Nonetheless, it is important to recognize that the effects of policy
changes are not always uniform within a population. Gruber and
Zinman (2000), for example, argue that youth smoking in the US is
affected by taxation rates but has different impacts on different age
groups within this category. Specifically, price is a powerful
determinant on smoking rates for high school seniors but not as
important for younger teens. Nevertheless, the authors conclude that
the cigarette taxes teens face significantly reduce smoking in later life.
This evidence is important given that numerous studies indicate that
approximately 90% of smokers begin smoking during their teenage
years, suggesting that price increases through taxes could have a
lasting and cumulative effect on rates of tobacco consumption
(Grossman & Chaloupka, 1997, p.292). Taxation increases the price of
tobacco use and it appears that price is a significant factor in the onset
and cessation of youth smoking.
6. IMPACT OF TOBACCO USE ON MORTALITY
A number of studies suggest that increases in tobacco taxes can result
in a decrease in smoking-related mortality. Moore (1996) found that a
significant decrease in smoking mortality rates accompanies increases
in tobacco excise taxes. The author concludes that a 10% increase in
tobacco excise taxes could save over 6,000 lives a year in the U.S.
Similarly, Levy et al. (2000), using a computer simulation model,
19
First Nations People and Tobacco Taxation
suggest that sustained tax increases have the potential to substantially
reduce the smoking rate and the number of premature smokingrelated deaths. Specifically, the authors looked at the effects of a 20
cent tax hike on a pack of cigarettes. They noted that the increase
would result in an immediate 2.5% reduction in the general smoking
rate and a 6% reduction amongst youth. As well, smoking-related
deaths would decline by 0.9%. Moreover, the effects of the tax
increase would accumulate over time such that the 20 cent tax
increase indexed to inflation would, in 40 years, result in a 12.4%
decrease in smoking and a 5.4% decrease in smoking-related
mortality.5 Studies such as these suggest that tobacco taxation can
save lives by introducing a price increases. These price increases are
especially positive for younger people who reduce their consumption
throughout their lifetime.
7. TAXATION AND TOBACCO CONSUMPTION: EVIDENCE TO THE
CONTRARY
It should be noted that despite the overwhelming evidence that infers
that taxation is a factor in lowering tobacco consumption, there are a
number of studies that suggest that taxes have little impact on
smoking rates. Significantly, it should be noted that smoking rates for
the Aboriginal youth population were remarkably consistent over a 20
year period, which might indicate less responsiveness to price (Levy et
al., 2000, p.279). It is necessary to turn briefly to three studies on
youth and the general population for some possible explanation.
20
First Nations People and Tobacco Taxation
Glied’s 2002 longitudinal study suggests that the effects of taxes can
diminish over time. She found that tobacco taxes did reduce smoking
rates for teens but the effect of taxes tended to have only limited
effects on the adult smoking rate. In other words, tobacco taxation
had much greater short-term than long-term effects. However, it
should be noted that Glied relied on a small sample size and thus her
results should be taken as indicative rather than definitive.
In another longitudinal study of youth smoking in the United States,
DeCicca et al. (2002) argue that cigarette taxes and the onset of youth
smoking between grades 8 to 12 are not strongly related. The authors
suggest that when other variables are removed there is little evidence
that youth are sensitive to tax increases. They argue that the influence
of peers may be the most significant determinant of youth smoking
and this overrides the effect of price increases. However, the authors
note that their data included only small tax increases and so cannot
tell us what the effects of very large tobacco tax increases on youth
smoking would be.
Sissoko (2002) argues that because demand for cigarettes is relatively
inelastic (i.e. price has relatively little effect on demand), the main
impact of tobacco taxation on tobacco usage is likely to be modest. He
argues that smoking rates may depend on whether increased state
revenue through tobacco taxation is channelled into smoking cessation
programs or not. Sissoko’s starting assumption (i.e., price does not
matter) makes it impossible to compare other programs to taxation.
Such a comparison would be useful.
21
First Nations People and Tobacco Taxation
These studies should not be taken as conclusive arguments against
using taxation as a strategy for reducing smoking rates. Rather they
point to the difficulty in isolating any one variable as the key
determinant of tobacco consumption. They also remind us of the
danger of aggregating all smokers into one category. For example
youth are motivated by different values than adults and, moreover,
young people, like all “subpopulations”, differ by region, gender,
ethnicity, income, education and so on. More conjecturally, perhaps
youth may tend to be more influenced by peers and media than strictly
"rational" economic calculation. It also seems that the three studies of
youth smoking were based on longitudinal data rather than cross
sectional data and so it is easier to follow the relationship between tax
rates and the onset of youth smoking. Above all, and as will be argued
below, this and other evidence suggests that there is no “magic bullet”
for reducing youth smoking rates but rather that tobacco taxation can
be an effective component of comprehensive anti-smoking programs
which have been shown to demonstrate the best results.
SUMMARY OF TAXATION AND TOBACCO CONSUMPTION AMONG
ABORIGINAL GROUPS AND THE GENERAL POPULATION
Tobacco use is a massive health risk and social problem that is
responsible for 50,000 deaths a year. In addition, the costs to the
public are enormous, costing nearly $20 billion annually. Although
smoking rates among the general Canadian population are steadily
declining, the negative impact on health, productivity and well being of
smokers is still high. Despite some public health efforts, but little
research on the matter, Aboriginal rates of tobacco consumption
22
First Nations People and Tobacco Taxation
remain disproportionately high. This continues to render Aboriginal
adults and youth susceptible to a host of health impacts such as
stroke, heart disease and cancer leading to death. While there is no
“magic bullet” for reducing smoking rates, tobacco taxation can be
effective, especially if other factors such as age, government resolve,
and the inflation rate are favourable to effecting one’s disposable
income. Certainly there is enough evidence presented above on the
relationship between smoking rates and taxes to make a strong
argument for assessing the effectiveness of taxation as a tool for use
by Inuit and First Nations people to reduce tobacco use.
8. TAXATION: IMMUNITY, ARRANGEMENTS, and ISSUES
The next section of the report addresses the overarching question of
what issues can be anticipated that challenge or potentially facilitate
the implementation of taxation as a tobacco cessation strategy. Here,
we indicate what taxation potentially means to an Aboriginal
community and why it may or may not be suitable for implementation.
The issues addressed below are Aboriginal people’s perceptions of the
Indian Act and tax immunity, taxation arrangements, smuggling,
revenues, and unintended benefits of new revenue streams created by
on-reserve taxation.
9. INDIAN ACT AND PERCEPTIONS OF TAX IMMUNITY
The key challenge to implementing taxation might be what the
Canadian Report of the Royal Commission on Aboriginal People states
23
First Nations People and Tobacco Taxation
is a perceived history among Aboriginal people of having an “immunity
from taxation” (Indian and Northern Affairs Canada). This perception is
not lived experience as virtually all Aboriginal adults in Canada pay
some taxes and many cannot take advantage of the tax exemption
(section 87 of the Indian Act – see below), either because they are not
registered (i.e., Metis or Inuit) or because transactions occur offreserve. In Canada, there is a federal legal exemption (via Section 87
of the Indian Act) from GST, provincial retail sales taxes, and tobacco
taxes for status persons (i.e., registered First Nations) who can
demonstrate close links between personal property (including income)
and a reserve (see Table 1). Employment income, if acquired on
reserve or in conducting band activity, is generally included (Canada
Revenue Agency) from this tax exemption. Métis and Inuit people - on
and off reserve - do not benefit from this limited exemption from tax.
Table 1 provides the essential conditions for Section 87 of the Indian
Act to apply.
Table 1. Section 87 of the Indian Act
In order for the section 87 exemption to apply, the following
requirements must be met:
1) the government levy from which exemption is sought must be a
tax;
2) the person claiming the exemption must be an Indian or a band
member, and;
3) the tax must be levied in respect of an Indian’s or a band’s
interest in either:
a) reserve or surrendered land, or
b)personal property situated on a reserve
(Maclagan, 2000: 1504)
24
First Nations People and Tobacco Taxation
Ken Medd (2004, p. 147-148) has written a document containing
recent excerpts from Native leaders’ statements about tax immunity.
Two examples are provided below (Table 2).
Table 2. What Native Leaders are Saying
Ovide Mercredi, the National Chief of the Assembly of First Nations, in
an address to a First Nation taxation conference in 1991:
“[T]axes like the GST, income tax, provincial sales tax and road taxes
are being imposed illegally against our First Nations and their citizens.”
The Confederacy of First Nations resolution in a 2001 resolution:
“WHEREAS the government of Canada, forgetful of history, indifferent
to its fiduciary obligations, disrespectful of our inherent right to selfgovernment and sovereign status, caring only to assimilate us and
extinguish our historic rights, has adopted a policy to eliminate the
historic taxation exemption that has been a corner stone of the
relationship between First Nations and the Crown...”
Native leaders represent a view of taxation, which is not conducive to
its widespread implementation of on-reserve tobacco taxation.
Moreover, a strong belief in tax immunity exists in the wider Aboriginal
community.
At the same time as immunity is being claimed, many First Nations are
exercising municipal-type property tax powers. They are doing so
according to Section 83 of the Indian Act. Admittedly, the original
thinking was to allow bands to levy property taxes on their own
members who held interests in real property on reserve (Ken Medd,
25
First Nations People and Tobacco Taxation
personal communication). However, the Kamloops amendment made it
possible for the First Nations property taxes to apply (some say in a
discriminatory manner) to non-members’ holdings in or on reserve
land. Since the Kamloops amendment, more than 100 First Nations
now impose property taxes under the Indian Act.
SUMMARY OF INDIAN ACT AND PERCEPTIONS OF TAX
IMMUNITY
Clearly perceptions of tax immunity are a powerful sentiment, with an
extensive history and continued resonance. This history and the
emotions it invokes does not incline Band residents to consider
taxation as the mechanism for increasing prices in order to reduce
smoking rates. Others mistrust taxation as a step towards government
abdication of historical responsibilities. At the same time, many First
Nations are choosing to impose property taxes in their communities.
10. SPECIFICS OF TAXATION AGREEMENTS
The implications of using taxation as a smoking cessation strategy in
First Nation and Inuit communities include the need to emphasize the
positive elements of tax powers, such as creating a revenue stream for
the Band. The arrangements that enable such tax powers are the topic
of the next segment of this section. They include the First Nations
Sales Tax and the First Nations Goods and Services Tax. Much of what
is written in the following sections was acquired in personal
communications with Ken Mead in the Government of Canada’s
26
First Nations People and Tobacco Taxation
Department of Finance. Information was supplied via Email, a phone
interview and one face-to-face meeting between January and April
2005.
Since 1997, the Government has expressed its willingness to enter into
taxation arrangements with interested First Nations and Inuit
communities. In 1997, the federal Budget Implementation Act (BIA)
permitted Bands to pass a bylaw that placed a 7% tax on the supply of
listed products on their lands. So far, the Federal Government has
entered into taxation arrangements with ten First Nations
communities. Currently, another 15-20 communities have expressed
interest (Ken Medd, personal communication, 2005). The following
discussion outlines two types of tax arrangements that have been
created, the First Nations Sales Tax and the First Nations Goods and
Services Tax. The idea is that implementing these taxes activates a
revenue stream that increases the prices of cigarettes, which, in turn,
deters smoking while supporting other community-based health
promotion programs that can have positive impacts on communities by
creating revenues for local government.
11. FIRST NATIONS SALES TAX (FNST)
In 1997, the federal Budget Implementation Act (BIA) contained a
provision that provided a tax power for the Cowichan Tribes to enact a
law imposing a tax similar to the provincial (BC) commodity tax on
tobacco. In this First Nation tax, called the Cowichan Tobacco Tax, the
Province of British Columbia collects and administers the tobacco tax
for the Cowichan Tribes and gives the First Nation’s residents revenue
27
First Nations People and Tobacco Taxation
back, while retaining the tobacco tax that is paid on reserve by nonNatives.
Subsequent BIAs for 1998 and 1999 provided other individual First
Nations with a power to tax sales of tobacco, fuels or alcohol products.
Specific federal legislation for each participating First Nation has led to
BIA 2000, which is the current legislative basis for what is called the
First Nations Sales Tax. BIA 2000 contained generic provisions
allowing any First Nation to enact a law imposing a sales tax, like the
GST, on sales of any or all of fuel, alcohol, and tobacco sold on the
First Nation lands.
The First Nation Sales Tax (FNST) permits First Nations to pass a
bylaw that places a 7% tax on the supply of listed products. This tax is
applied to purchases made by residents and non-residents alike.
“Listed products” refers to alcoholic beverages, fuel, or tobacco
products. Currently about twelve First Nations apply this tax. The FNST
is considered to be a good option for communities with a location that
generates a large amount of consumer traffic flowing through the
community. The Federal Government agreed to administer the tax at
no cost to the First Nation because it is harmonized with and operates
like the GST. The method for estimating FNST revenues can be based,
in part, on actual tax collected at the businesses selling the specified
products on First Nation lands. The FNST is a very straightforward tax
on certain products that permits First Nations with an advantageous
location to limit tobacco use and create a revenue stream.
28
First Nations People and Tobacco Taxation
12. FIRST NATIONS GOODS AND SERVICES TAX
The 2003 BIA included legislation that allows a First Nations Goods and
Services Tax (FNGST). The FNGST replaces the GST and is a tax on
consumption that is levied by a First Nation government with revenues
going to the First Nation. The FNGST is a tax that applies to all goods
and services sold on First Nation’s land. In this, it is similar to the
federal GST which applies to transactions off reserve. However, on
reserve, both band members and other persons are liable for paying
the tax. The difference between the FNST and FNGST is that the
FNGST involves a greater number of goods and services and it is a tax
on consumption that is made regardless of place of sales. The
implication is that a particular community does not need a commercial
base to create a revenue stream; all that is needed is a consumption
base (i.e., residents).
There are two methods for calculating the FNGST, the simplified
revenue estimation method (SRM) and the detailed revenue estimation
method (DRM). The SRM attributes consumption to residents by
calculating the net GST for the province or territory in which the
community is located. This total is then multiplied by the percentage of
the population that the individual First Nations community represents.
Finally a number representing the relative income of the community is
entered into the equation. This factor is important because the relative
incomes of First Nation residents are often lower than the Canadian
average.
The detailed revenue estimation method (DRM) tackles the question of
what proportion of industry is related to either residential or immediate
29
First Nations People and Tobacco Taxation
consumption. It does so when consumption on the lands of the taxing
First Nation is attributable to non-residents as well as to residents. The
overall purpose is to create a formula, which equitably determines the
revenues that flow back to the First Nation community under the
FNGST. These complex calculations are important because it helps to
establish a FNGST as a tax arrangement that respects Section 87 of
the Indian Act and could therefore be included in tobacco cessation
strategy.6 The FNST and FNGST offer central strategies for creating tax
arrangements that could become an obvious revenue stream for
comprehensive health promotion strategies. The fact that FNST and
FNGST are tax arrangements that result in higher tobacco prices
suggests that they could be also deployed as smoking cessation
strategies
SUMMARY OF FNST AND FNGST
The difference between the FNST and the FNGST is that the FNGST
involves a greater number of goods and services and it is a tax on
consumption that is made regardless of the location of purchase.
Exemptions exist for some goods and services (e.g., milk) and for
small businesses, governments (including First Nations), and not-forprofit organizations. These properties of the FNGST means that a
particular community does not need a commercial base (i.e.,
residents) to increase the price of goods in order to lower smoking
rates and create revenue. Both of these tax arrangements are also
partnerships with either the federal or provincial governments. This
means that the negative perception of taxes by First Nation people
30
First Nations People and Tobacco Taxation
may remain because of the association with the Federal government
and a historical perception of tax immunity.
13. SMUGGLING AND DOWN THE ROAD SALES
As discussed earlier, in the 1980s Canada raised taxes to combat some
of the highest smoking rates in the world. The tax increases led to a
drop in smoking rates among teens from 43% in 1981 to 23% in the
early ‘90s as well as increased tax revenues (Banthin, 2004). However,
high prices brought about by increased taxation encouraged an
increase in the prevalence of smuggling in Canada (The Economist,
1994). Consequently, large tobacco tax reductions were introduced by
the federal government and several provincial governments in early
1994 to combat the underground market. As a result, the average
price of a pack of cigarettes fell to $3.20 (Sweanor et al, 2000, p.169)
and cost Canadian governments almost $4.8 billion in tobacco tax
revenues (Banthin, 2004). One estimate suggested that 30% of all
cigarettes sold in Canada were contraband (Thatcher, 2003, p.22).
Using complex formulas, Fougere (2000) calculates that in 1993 the
demand for cash associated with tobacco contraband represented up
to 2.6% of the total currency demand in Canada.7
A related phenomenon to smuggling is “down the road” sales of onreserve tobacco products, where tobacco products are purchased in
communities without taxes and sold to residents from communities
with taxes. Down the road sales challenge taxation initiatives because
they allow residents to avoid taxes, access cheap cigarettes, and
continue smoking. The potential source of the problem is neighbouring
31
First Nations People and Tobacco Taxation
First Nations who, in the absence of a tax agreement, have a
significant pricing advantage for their customers. First Nations
residents can continue to purchase tobacco products at lower prices
“just down the road.” Down the road sales are not the same as
smuggling because they are not illegal and we are talking about smallscale purchases for individual consumption. However, as the illicit sales
suggest, tobacco users, like anyone, will take advantage of lower
prices and such sales will lessen the impact of on-reserve taxes and
consequently lower tax revenues.
14. REVENUE GENERATION
The most recent Canadian federal budget (Department of Finance
Canada, 2005, p.408; p.412) stated that taxation arrangements with
First Nation and Inuit communities are important. The same document
also pointed to taxation in general as an important element of the
Government's health strategy to discourage smoking among
Canadians. One implication might be that Federal tax powers are going
to be used to run health promotion programs. Are sufficient revenues
being generated for communities to run these programs? Some
research suggests the answer is no, finding that even those First
Nations who are using taxes are not generating enough revenue
(Fiscal Realities Economists, 2003) to sustainably manage their health
promotion programs. These researchers conclude that First Nations
governments have federally-recognized authority over only about 14%
of their potential tax base through property, fuel, alcohol, and tobacco
tax. Further, only some (~100) First Nation governments are taxing
property and only two have legislation enabling them to tax tobacco.
32
First Nations People and Tobacco Taxation
The Fiscal Realities Economists stress that increased revenue is
imperative because First Nation governments are facing:
(i) Rapidly growing populations will drive up the expenditures
needed to maintain current levels of service.
(ii) Communities will have to compete for federal funds against
political pressure for tax cuts, increased spending on social
programs, and the cost increases associated with an aging society.
(iii) Self government and economic aspirations require funds over
and above those needed to maintain existing service levels.
If these communities implement new taxes on their people, it is
uncertain if adequate revenues will be generated and health promotion
strategies may be overshadowed by other priorities in First Nations
communities.
SUMMARY OF ISSUES REGARDING TAXATION AS A SMOKING
CESSATION STRATEGY
The federal government has expressed its willingness to enter into
taxation arrangements with First Nations interested in exercising
taxation powers through the FNST and FNGST. There is a strong
sentiment among First Nations leaders that taxation is counter to
previously established legal and treaty rights that are perceived to be
a source of tax immunity. There is also some mistrust that is
generated out of a very real fear that federal taxation powers are one
part of a larger federal effort to reduce their responsibilities to First
Nations and Inuit communities while maintaining control over
33
First Nations People and Tobacco Taxation
expenditures. The fact that the tax arrangements with communities,
municipalities, and individuals are consistent with the overall Canadian
tax system may do little to alleviate that fear. However, the move by
the Federal Government to give individual First Nations the power to
decide whether or not to exercise tax powers should provide grounds
for trust. First Nations tax powers are not unsubstantial in terms of
revenues, but the revenues they generate may be insufficient to
support tobacco cessation programs. Smuggling and down-the-road
sales would be serious threats to revenue generation efforts. Still, the
goal of creating a revenue stream for health promotion purposes is
promising for smoking cessation efforts and consistent with newly
emerging tax powers for First Nations. These revenues can support
health promotion efforts in the communities.
RECOMMENDATIONS FOR FURTHER RESEARCH, POLICY AND
COMMUNITY
We conclude this paper with several recommendations for further
research by policymakers and community members. They are intended
to provide future directions in the continuing dialogue on tobacco use
in Aboriginal communities in Canada.
15. IMPORTANCE OF COMPREHENSIVE APPROACH
It is important not to overstate the case for tobacco taxes as the only
tool in reducing tobacco consumption. Evidence from the US suggests
that the most successful cessation strategies employ a range of tactics
34
First Nations People and Tobacco Taxation
to alter the social and economic environment of smokers. Although
many of the studies cited in this document strongly suggest that
taxation can be an effective strategy in reducing tobacco consumption,
it is difficult to demonstrate the effectiveness of any one strategy. This
may mean that the best strategy involves combining approaches such
as media campaigns, taxation and efforts to make smoking socially
unacceptable (Burns, 1992; Levy et. al., 2003).
Similarly, Wardman and Khan (2004b) assert that meeting the
challenge of stopping adolescent smoking is best met by developing a
comprehensive approach that focuses on taxation but also includes
education, the elimination of all forms of tobacco advertising and
sponsorship, industry “de-glamorization” strategies, and marketing
controls, such as warnings on packages. A comprehensive Canadian
national strategy to address tobacco use in Aboriginal communities
would identify prevention, cessation and protection measures. Tobacco
use must be seen as a high public health priority and a call to action
for the community, health professionals and government leadership.
Thus a comprehensive strategy would not rely solely on the federal
and provincial governments but would crucially involve consultation
with and implementation by First Nations communities.
35
First Nations People and Tobacco Taxation
16. CASE STUDY RESEARCH ON THE HEALTH IMPACTS OF
IMPLEMENTING TAXATION AGREEMENTS, RAISING REVENUES,
AND ESTABLISHING TOBACCO MISUSE IN ABORIGINAL
COMMUNITIES
Access considerations precluded gathering primary data on First
Nations and Inuit communities that have employed taxation as a
smoking cessation strategy. National and international examples of
how Aboriginal communities have discussed and implemented taxation
policies can inform future research on this topic. Particular areas of
future study would explore the health impacts of implementing
taxation agreements and establishing tobacco misuse in aboriginal
communities:
1. The health impacts of community-based strategies for smoking
cessation (especially those paid for using taxation).
2. Attitudes and perception of residents to financing health
promotion strategies through on-reserve tax revenues.
3. Attitudes and perception of residents to the use of taxes to
create revenue.
4. Relevant legal interpretations of Native self government,
sovereignty and autonomy over taxation revenues
5. Issues in delivering culturally appropriate smoking cessation
programs to indigenous people that take into consideration
traditional uses of tobacco.
Case studies are detailed examinations of complex topics and they
typically involve a number of data collection strategies. In Canada, a
fifty million dollar Tobacco Control Strategy is currently being
implemented to address the high rates of smoking and tobacco use in
36
First Nations People and Tobacco Taxation
First Nations and Inuit communities. Part of these funds could be
allocated to implementing and allocating a cross-case analysis of
tobacco taxation in Aboriginal communities.
17. INTER-COMMUNITY COLLABORATION
To address the problem of “down the road” sales, it is recommended
that a cluster of neighbouring Bands enter into an arrangement to tax
the sales of tobacco products. As the term suggests, neighbouring
communities are the source of down the road sales and therefore,
regional adoption of tobacco taxes could mitigate the potential for
down the road sales. This collaboration could lead to the collective
administration offices implementing the taxes and reporting to their
membership. The Bands could establish a common tax administration
that could be a check and balance for one another as well as a source
of dialogue and comparison on health promotion strategies. This
initiative could be supported by the recently established First Nations
Tax Commission (FNTC). The FNTC is responsible for the development
and regulation of the First Nations property tax system, ensuring that
tax powers are equitably arranged. Inter-community collaboration
among neighbouring bands can potentially support the successful
implementation of taxation agreements by the Federal Government
within a number of communities.
37
First Nations People and Tobacco Taxation
18. CANADIAN ABORIGINAL COMMUNITIES AS ROLE MODEL
The Framework Convention on Tobacco Control (FCTC) has been
signed. It is the first modern public health treaty and Canada was a
leader in its development. Among other things The FCTC recognizes
that tobacco misuse has become a global problem, rivaling HIV/AIDS
as the fastest growing cause of death in the developing world.
Taxation is one of the measures put forward to assist in tobacco
control of these developing countries.
The First Nations Tax Commission and the Framework Convention on
Tobacco Control could be coupled to enable First Nations and Inuit
communities in this country to take the lead in utilizing taxation to
reduce health risks while contributing economic revenue to the
community at the same time. With respect to health risks, taxation has
been identified by the major health and medical organizations in the
US as well as the World Health Organization as critically important to
reducing tobacco consumption (Sweanor, et al., 2000). Regarding tax
revenue, First Nations and Inuit communities in Canada could, under
the auspices of the Tobacco Control Strategy, generate much needed
revenue for health care services and promotion. In doing so, they
could serve as a model for similar initiatives elsewhere in Canada and
in developing nations around the world.
OVERALL SUMMARY OF THE WHOLE REPORT
Although smoking rates among the general Canadian population are
steadily declining, Aboriginal rates of tobacco consumption remain as
high as ever. Aboriginal people are susceptible to a host of health
38
First Nations People and Tobacco Taxation
impacts, some of which are more prevalent in Aboriginal people, such
as stroke, heart disease and cancer. Taxation has the potential to
decrease tobacco consumption through increased pricing and there is a
strong argument for assessing the effectiveness of taxation as a tool
for use by Inuit and First Nation people to reduce tobacco
consumption. The FNST and FNGST offers tax arrangements with the
federal government that present First Nation and Inuit communities
with a revenue stream. However, the association of these taxes with
the federal government could provoke resistance to implementation
due to commonly held negative perceptions of taxes among First
Nations people. “Down the road” sales and smuggling also pose
serious threats to revenue generation from on-reserve tobacco
taxation; if they become widespread they will undermine the
effectiveness of increased tobacco price as a deterrent to smoking and
as well community revenues from tobacco sales will not be adequate
and sustainable. Although further research is needed, in particular on
tobacco taxation strategies already in use in Aboriginal communities in
Canada, the evidence suggests that tobacco taxation can be an effect
component of comprehensive anti-smoking campaigns.
Although smoking rates among the general Canadian population are
steadily declining, Aboriginal rates of tobacco consumption remain as
high as ever. Aboriginal people are susceptible to a host of health
impacts, some of which are more prevalent in Aboriginal people, such
as stroke, heart disease and cancer. Taxation has the potential to
decrease tobacco consumption through increased pricing and there is a
strong argument for assessing the effectiveness of taxation as a tool
for use by Inuit and First Nation people to reduce tobacco
39
First Nations People and Tobacco Taxation
consumption. The FNST and FNGST offers tax arrangements with the
federal government that present First Nation and Inuit communities
with a revenue stream. However, the association of these taxes with
the federal government could provoke resistance to implementation
due to commonly held negative perceptions of taxes among First
Nations people. “Down the road” sales and smuggling also pose
serious threats to revenue generation from on-reserve tobacco
taxation; if they become widespread they will undermine the
effectiveness of increased tobacco price as a deterrent to smoking and
as well community revenues from tobacco sales will not be adequate
and sustainable. Although further research is needed, in particular on
tobacco taxation strategies already in use in Aboriginal communities in
Canada, the evidence suggests that tobacco taxation can be an effect
component of comprehensive anti-smoking campaigns.
40
First Nations People and Tobacco Taxation
References
Banthin, Christopher. Cheap smokes: State and federal responses to
tobacco tax evasion over the Internet. Health Matrix: Journal of Law
Medicine 2004; Summer, 14(2): 325-356
Bartecchi CE, MacKenzie T, Schrier R. The human costs of tobacco use.
New England Journal of Medicine 1994; 330(13): 907-912
Burns DM. Positive evidence on effectiveness of selected smoking
prevention programs in the United States. Journal of the National
Cancer Institute; 1992; 12:17-20
Indian and Northern Affairs Canada. Canadian Report of the Royal
Commission on Aboriginal People No Date. Available on line at
http://www.ainc-inac.gc.ca/ch/rcap/rpt/index_e.html (Accessed on
April 28, 2005).
Canada Revenue Agency. Available on line at http://www.craarc.gc.ca/Aboriginals/guidelines-.html (Accessed on March 12, 2005).
Chen, VW. Smoking and the health gap in minorities Ann Epidemiol.
1993; 3(2):159-64
Colman, G., Remler, D. K. Vertical Equity Consequences of Very High
Cigarette Tax Increases: If the Poor are the Ones Smoking, How Could
Cigarette Tax Increases be Progressive?, 2004; NBER Working Papers
10906, National Bureau of Economic Research, Inc
DeCicca P, Kenkel D, Mathios A. Putting out the fires: Will higher taxes
reduce the onset of youth smoking? Journal of Political Economy 2002;
February 110(1):144-69
Department of Finance Canada. The Budget Plan, 2005. Distribution
Centre Department of Finance Canada: Ottawa. Available on line at
41
First Nations People and Tobacco Taxation
www.fin.gc.ca/budget05/pdf/bp2005e.pdf (Accessed February 23,
2005).
Ding A. Youth are more sensitive to price changes in cigarettes than
adults. The Yale Journal of Biology and Medicine May 2003; 76(3):115124(10).
First Nations Tax Commission. Available on line at
http://www.fntc.ca/main.phtml (Accessed March 25, 2005).
Fiscal Realities Economists. First nation taxation and new fiscal
relationships. Kamloops and Vancouver, BC, 2003. Available on-line at
http://www.fiscalrealities.com/recentwork.htm (Accessed Feb 15,
2005).
Fougere M. Tobacco smuggling in Canada, the demand for "nico"
dollars, and the size of the underground economy. Canadian Tax
Journal 2000; 48(6): 1793-1814.
Framework Convention on Tobacco Control. Available on line at
http://www.who.int/tobacco/framework/en/ (Accessed April 15, 2005).
Glied S. Youth tobacco control: Reconciling theory and empirical
evidence. Journal of Health Economics 2002; January 21(1): 117-35
Gohdes D, Harwell TS, Cummings S, Moore KR, Smilie JG, Helgerson
SD. Smoking cessation and prevention: an urgent public health priority
for American Indians in the Northern Plains. Public Health Reports.
2002; 117(3): 281-90.
Government of Yukon, Bureau of Statistics. An Accounting of Health:
What the numbers say (A review of the methodology and the results of
the 1993 Yukon Health Promotion Survey). March, 1994
Green LW. Taxes and the tobacco wars. Canadian Medial Association
Journal. 1997; 156: 205-06.
42
First Nations People and Tobacco Taxation
Grossman, M., Chaloupka, F.J. Cigarette Taxes: The Straw to Break
the Camel's Back, Public Health Reports 1997; 112(4):290–297,
Gruber J, Sen A, Stabile M. Estimating price elasticities when there is
smuggling: The sensitivity of smoking to price in Canada. Journal of
Health Economics. 2003; 22(5): 821-42
Gruber J, Zinman J. Youth smoking in the U.S.: Evidence and
implications. National Bureau of Economic Research Working Paper:
7780. 2000. Available on-line at http://www.nber.org/papers/W7780
(Accessed Feb 15, 2005).
Health Canada. A statistical profile on the health crisis of First Nations
in Canada. Health Canada, 2000. Available on-line at http://www.hcsc.gc.ca/fnihb-dgspni/fnihb/sppa/hia/publications/statistical_profile.pdf
(Accessed April 1, 2005)
Health Canada. Canadian Tobacco Use Monitoring Survey 2003.
Available on-line at: http://www.hc-sc.gc.ca/hecssesc/tobacco/research/ctums/2003/summary_annual_2003.html
(Accessed April 28, 2005)
Hu TW, Sung HY, Keeler TE. Reducing cigarette consumption in
California: tobacco taxes vs an anti-smoking media campaign.
American Journal of Public Health. 1995; 85 (9), pp. 1218-22.
Ivers RG. An evidence-based approach to planning tobacco
interventions for Aboriginal people. Drug and Alcohol Review. 2004; 23
(1): 5-9.
Lazar, F. Comments regarding: First Nations Fiscal and Statistical
Institutions Initiative. Union of British Columbia Indian Chiefs, 2002.
Available on-line at http://www.ubcic.bc.ca/docs/LazarFinancial_Institutions_Sept2002.pdf (Accessed April 1, 2005).
43
First Nations People and Tobacco Taxation
Levy DT, Cummings KM, Hyland A. Increasing taxes as a strategy to
reduce cigarette use and deaths: Results of a simulation model.
Preventive Medicine. 2000 31(3): 279-86
Levy DT, Mumford EA, Pesin B. Tobacco control policies and reductions
in smoking rates and smoking-related deaths. Expert Review of
Pharmacoeconomics and Outcomes Research. 2003 3(4): 457-68
Liang L, Chaloupka F, Nichter M, Clayton R. Prices, policies and youth
smoking, May 2001. Addiction. 2003; 98(Suppl 1): 105-22.
Maclagan B, Section 87 of the Indian Act: Recent Developments in the
Taxation of Investment Income. Canadian Tax Journal. 2004; 48(5):
1503-1524.
Medd K. First Nations and Taxation in Canada. Working Paper.
Department of Finance, Government of Canada 2004.
Medd K. Personal Communications (e-mail, phone calls, face-to-face
interview), January – April 2005.
Moore MJ. Death and tobacco taxes. RAND Journal of Economics.
1996; 27(2): 415-28.
Reading J. Eating Smoke: A Review of Non-Traditional Use of Tobacco
Among Aboriginal People. Ottawa, ON: Health Canada, 1996
Reading J, Allard Y. Chapter 4: The Tobacco Report. In Final Report of
the First Nations and Inuit Regional Health Survey (FNIRHS). Health
Canada, 2002: 86-135. Available on-line at http://www.hcsc.gc.ca/fnihbdgspni/fnihb/aboriginalhealth/reports_summaries/regional_survey.htm
(Accessed Feb 23, 2005.
44
First Nations People and Tobacco Taxation
Sissoko M. Cigarette consumption in different U.S. states, 1955–1998:
An empirical analysis of the potential use of excise taxation to reduce
smoking. Journal of Consumer Policy 2002; 25(1): 89-106.
Sweanor D, Burns DM, Major JM, Anderson CM. Effect of Cost on
Cessation. in Population Based Smoking Cessation: Proceedings of a
Conference on What Works to Influence Cessation in the General
Population. Smoking and Tobacco Control Monograph No. 12.
Bethesda, MD: U.S. Department of Health and Human Services,
National Institutes of Health, National Cancer Institute, NIH Publication
No. 00-4892, November 2000. Available on-line at
http://www.dccps.cancer.gov/tcrb/monographs/12/Chapter_6.pdf
(Accessed April 4, 2005)
Sweet, M. High smoking rates among Aboriginal community cause
financial hardship. British Medical Journal 2002; 324(7349): 1296.
Thatcher R. A good day for big tobacco: A bad day for world health
Canadian Dimension 2003; 37(2):22.
The Economist. Smoke smuggling: Contraband cigarettes hurt
Canada's cigarette makers. 1994; 330: 68
Von Gernet, A. North American Indigenous Nicoltiana Use and Tobacco
Shamanism: The Early Documentary Record, pp. 59-80 in J.C. Winter
(ed.) Tobacco Use by Native Americans: sacred smoke and silent killer.
2000. Norman, Ok: University of Oklahoma Press.
Unwin CE, Gracey MS, Thomson NJ. The impact of tobacco smoking
and alcohol consumption on Aboriginal mortality in Western Australia,
1989-1991. Medical Journal of Australia 1995; 162 (9): 475-78.
Wardman D, Khan N. (2004a) Smoking-attributable mortality among
british columbia’s first nations populations. International Journal of
Circumpolar Health. 63(1):81-92.
45
First Nations People and Tobacco Taxation
Wardman AED, Khan NA. Tobacco Cessation Pharmacotherapy Use
Among First Nations Persons Residing Within British Columbia. Nicotine
& Tobacco Research 2004b; August 6(4): 689-692
Winter, J.C. Traditional Uses of Tobacco by Native Americans, pp. 9-58
in J.C. Winter (ed.) Tobacco Use by Native Americans: sacred smoke
and silent killer. 2000. Norman, Ok: University of Oklahoma Press.
Wunska. First Nations Youth Enquiry into Tobacco Use. Final
Comprehensive Report to Health Canada. The First Nations Social
Research Institute, Saskatchewan Indian Federated College.
Saskatoon, Saskatchewan. April. 1997
Works Consulted:
Brady M. Historical and cultural roots of tobacco use among Aboriginal
and Torres Strait Islander people. Australian and New Zealand Journal
of Public Health 2002; 26(2): 120(5).
First Nations Chiefs’ Health Committee. Chiefs’ Health Examiner:
Special Edition. 2001; 2. Available on-line at
www.fnchc.ca/_pdf/Special_Edition_April.pdf (Accessed April 1, 2005).
Hajek P, Stead LF, West R, Jarvis M. Relapse prevention interventions
for smoking cessation. The Cochrane Database of Systematic Reviews
2005; 1. Available on-line at
http://www.cochrane.org/cochrane/revabstr/ab003999.htm (Accessed
April 1, 2005).
Jenkins CN, McPhee SJ, Le A, Pham GQ, Ha NT, Stewart S. The
effectiveness of a media-led intervention to reduce smoking among
Vietnamese-American men. American Journal of Public Health 1997;
87 (6): 1031-34.
Lancaster T, Stead LF. Self-help interventions for smoking cessation.
The Cochrane Database of Systematic Reviews 2002; 3. Available on-
46
First Nations People and Tobacco Taxation
line at http://www.cochrane.org/cochrane/revabstr/ab001118.htm
(Accessed April 1, 2005).
Marin G, Marin BV, Pérez-Stable EJ, Sabogal F, Otereo-Sabogal R.
Changes in information as a function of a culturally appropriate
smoking cessation community intervention for Hispanics. American
Journal of Community Psychology 1990; 18 (6): 847-64.
Marin BV, Pérez-Stable EJ, Marin G, Hauck WW. Effects of a
community intervention to change smoking behavior among Hispanics.
American Journal of Preventive Medicine. 1994; 10 (6): 340-47.
McPhee SJ, Jenkins CN, Wong C, Fordham D, Lai KQ, Bird JA,
Moskowitz JM. Smoking cessation intervention among Vietnamese
Americans: A controlled trial. Tobacco Control 1995; 4 (suppl1): S1624.
Millar WJ. Place of birth and ethnic status: factors associated with
smoking prevalence among Canadians. Health Reports. 1992; 4(1): 724.
Rice VH, Stead LF. Nursing interventions for smoking cessation. The
Cochrane Database of Systematic Reviews 2004; 1. Available on-line
at http://www.cochrane.org/cochrane/revabstr/ab001188.htm
(Accessed April 1, 2005).
Sandoval VA. Smoking and Hispanics: Issues of identity, culture,
economics, prevalence, and prevention. Health Values 1994; 18(1):
44-53.
Studlar DT. The mouse that roared? Lesson drawing on tobacco
regulation across the Canada-United States border. Canadian American Public Policy 1999; 38: 1-56.
47
First Nations People and Tobacco Taxation
Tillgren P, Rosén M, Haglund BJ, Ainetdin T, Lindholm L, Holm LE.
Cost-effectiveness of a tobacco ‘Quit and Win’ contest in Sweden.
Health Policy 1993; 26: 43-53.
Tillgren P, Haglund BJ, Ainetdin T, Thörnqvist E, Uhrbom E, Holm L.
Effects of different intervention strategies in the implementation of a
nationwide tobacco “Quit and Win” contest in Sweden. Tobacco
Control, 1995; 4: 344-50.
Unger JB, Cruz T, Baezconde-Garbanati L, Shakib S, Palmer P,
Anderson Johnson C, Shields A, Cruz J, Mock J, Edsall E, Glynn T, Gritz
E. Exploring the cultural context of tobacco use: A transdisciplinary
framework. Nicotine & Tobacco Research 2003; 5 (suppl 1): S101S107
Ussher M, West R, Taylor A, McEwen A. Exercise interventions for
smoking cessation. The Cochrane Database of Systematic Reviews
2005; 1. Available on-line at
http://www.cochrane.org/cochrane/revabstr/ab002295.htm (Accessed
April 1, 2005)
World Health Organization. Ministerial round tables on risks to health,
55th World Health Assembly, May 11-16, 2002.
Zhu SH, Pierce JP. Telephone counselling for smoking cessation: A
randomized trial. Paper presented at the Fourteenth Annual Scientific
Sessions of the Society of Behavioral Medicine, San Francisco, 1993.
ENDNOTES
1 This claim is based on some intriguing “back of the envelope” calculations
regarding the absolute number of fewer smokers and larger revenues, which might
result from increasing the cost of cigarettes by 7%. Here is the formula that answers
these two questions.
48
First Nations People and Tobacco Taxation

Number of smokers who are Aboriginal. Since the Aboriginal smoking rate is
approximately 60%; 1.3 million people identified as Aboriginal according to
Statistics Canada
(www12.statcan.ca/english/census01/products/analytic/companion/abor/cana
da.cfm). Thus, there are approximately 780,000 Aboriginal smokers.

We slightly amend the increase/reduction formula that comes from the
Physicians for A Smoke-Free Canada (www.smoke-free.ca). They state that a
10% increase in price may reduce prevalence of smoking by 4%. We can
therefore conservatively suggest something like a 7% increase will lead to 3%
reductions.

Assuming 1.3 million aboriginals, and a 57% instead of a 60% smoking rate
(60% - 3%), we are talking about 39,000 quitters.

The money potentially available for a community that receives the revenue is
based on the average smoker, who consumes 16 cigarettes per day (Public
Health Agency of Canada (www.phac-aspc.gc.ca/publicat/prcccrelccc/chap_3_e.html).

Assuming 20 cigarettes per pack, 16 cigarettes per day is approximately 292
packs per year.

Conservatively assuming a cost of $5 per pack, we are talking about the
average individual spending $1460 per year on cigarettes.

A 7% tax on $1460 would net 102.20 per smoker per year (this of course
would be somewhat lower as consumption declined).

1.3 million x .57 (number of smokers after price increase) = 741,000

741,000 X 102.20 = $75,730,000 per year across the country meaning
approximately $75,000 per community of 1300 people.
2
Tobacco has traditionally held a prominent place in many Aboriginal ceremonies,
rituals, spirituality, trading patterns and medicinal use (Gohdes et.al, 2002, p.288).
Winter (2000) encapsulates the use of tobacco by Indigenous groups.
Native Americans still use tobacco, and although many of them smoke, chew,
and otherwise ingest it in the manner as most non-Indians [sic] – that is, as a
dangerous recreational drug – a large number of Indian revere tobacco as a
sacred plant, a life-affirming force, a food of the spirits, a god itself. From
northern Canada to Panama, native North American use Nicotiana tacacum, N.
rustica, and other species of a narcostimulant – a psychotropic, mind-altering
49
First Nations People and Tobacco Taxation
substance that serves as a medium between the ordinary world of humans and
the superordinary world of the spirits. Tobacco leaves were and are smoked in
pipes, cigars, and cigarettes. Leaves are often chewed (often with lime) and
sometimes eaten. Resin and concentrates are licked. An infusion is drunk,
occasionally with datura (jimsonweed) or other drugs. Tobacco powder is
snuffed. Tobacco smoke is blown on the body and into the air. Tobacco juice is
painted on the body and used medically as a poultice. Tobacco incense is
burned. Tobacco offerings are buried and are cast onto the ground, into the air,
onto the water (p.3).
Tobacco use has an extensive history and geographical reach. Traditionally, it was
generally used in small amounts in spiritual and ceremonial situations. The mindaltering properties of tobacco were used to induce visions and trances to bring about
direct communication with the supernatural world. Some believed that it was food for
gods and others considered tobacco itself to be a god. It also figured in indigenous
creation stories and was prized for its healing properties.
The lengthy quotation misses a point that is particularly relevant for understanding
the relationship between tobacco use and health among the Aboriginal peoples in
what is now Canada. Tobacco was economically important to trade among
Indigenous bands and for fur traders, like the Hudson’s Bay Company. In fact, the
Aztecs, in what is now Brazil, grew tobacco that was highly favoured by the Hudson’s
Bay Company, which, in turn, gave it as a gift when engaging in trade. von Gernet
(2000) states that nomadic peoples, such as the Algonkians (Canadian Shield),
Micmac (Nova Scotia and New Brunswick) and Montagnais (Labrador) may have even
cultivated their own tobacco after having been introduced to it. The Haida and Tlingit
grew and exported tobacco from their homes in Northwestern British Columbia
(Winter, 2002, p.26-27). Winter (2002, p.16-17) champions the Petun and Neutral
peoples as the largest cultivators and traders of tobacco in what is now Canada. The
Petun grew tobacco in Southern Ontario (between Lakes Ontario and Huron). Petun
was the name given to this nation from the French, who borrowed the word from
Indigenous people in Brazil. It means tobacco nation. The point is that the cultivation
of tobacco is at least a marker (if not a factor) in the colonization of Aboriginal
people in North America; colonization itself might be the most important sociocultural determinant of health.
50
First Nations People and Tobacco Taxation
(Longclaws et al 1980; Young 1982; McIntyre and Shah 1986; Warren 1988; Millar
1990; Stevens 1991; Rode and Shephard 1992; Clarkson et al 1992; Young et al
1993; Mills et. al., 1993; Erickson 1996; Health Canada: Advisory Committee on
Aboriginals and Tobacco Use, 1993; The Tobacco Demand Reduction Program, 1994;
Reading 1996; Wunska 1997)
4
However, it should be noted that these decreases are aggregate measures of
3
tobacco consumption and not cessation as such. That is to say, these figures
measure a decrease in the number of cigarettes purchased as a result of a
combination of cessation and reduced per day consumption (Sweanor et al, 2000,
166). In general, studies have found that approximately one-half of the decrease is
due to reductions of tobacco use (Levy, Cummings and Hyland, 2000, 280).
5
Levy, Mumford and Pesin (2003) make a similar assertion. Using a computer
simulation model, they compared six anti-smoking policies and their effectiveness in
reducing premature mortality. Their results suggest that a comprehensive package
of taxes, clean air laws, mass media campaigns, advertising, cessation programs and
curtailing youth access showed the best outcomes compared with individual
initiatives/interventions. They do note, however, that taxes and clean air laws by
themselves would have a significant impact in lowering smoking.
6
Here is a further explanation of the DRM. The starting point for the DRM is the SRM
but it also breaks the tax base into housing (~13%), exempt (~17%), and consumer
expenditure (~70%) categories. The consumer expenditure portion is further
categorized into residence-based consumption (~42%) and immediate consumption
(~27%). Immediate consumption reflects activities such as eating at a restaurant,
going to a theatre to watch a movie, purchasing tobacco, etc. The DRM formula
therefore combines a value for residence-based consumption by the residents on
First Nation’s lands (e.g., a washer or a hockey stick) with a value for immediate
consumption by both residents and other persons that occurs at the business
premises on First Nations lands (representing tax on hotel stays, golf green fees,
theatre admissions, restaurant meals, etc.). Doing so involves gathering data on
what industrial sector firms are located in, classifying whether the firm’s outputs are
for residential or immediate consumption, and determining the amount of input tax
credits.
51
First Nations People and Tobacco Taxation
7
Interestingly, this research postulates that a 1% rise in the relative price of
Canadian tobacco would stimulate the consumption of contraband tobacco by about
2.6%.
52