Tobacco Industry Health Cost Recovery Fee

Subject Social
Year 2021
Status Adopted - Active
Sponsor - Mover Airdrie, City of
Sponsor - Seconder St. Albert, City of
Active Clauses

IT IS THEREFORE RESOLVED THAT the AUMA advocate to the Alberta government to use the Crown’s Right of Recovery Act to establish a five percent (5%) levy on all Alberta revenues collected by major tobacco and vaping manufacturers and importers. Funds collected would be redirected to support effective programs and strategies to reduce and prevent tobacco and vaping use in Alberta.

Whereas Clauses

WHEREAS tobacco use results in 4,000 premature deaths and 80,000 residents suffering with related illnesses each year in Alberta;
WHEREAS the cost of tobacco use in Alberta exceeds $1 billion annually including health care costs, reduced productivity, fire and environmental damage;
WHEREAS a substantial portion of these costs are a direct result of the harmful health impacts from the use of tobacco and tobacco products;
WHEREAS tobacco companies are not required to pay any compensation to Alberta taxpayers beyond general corporate and payroll taxes; and
WHEREAS many Alberta industries are required to compensate Alberta taxpayers for negligence and third party damages including automobile insurers; transportation companies; oil, gas and mining operators; and agricultural producers (i.e., polluter pays principle).

Resolution Background

Tobacco use affects every Alberta municipality and their residents from a clean-up, environmental and health perspective. Taxes collected on tobacco products in Alberta raises approximately $750 million annually. As the cost of tobacco use exceeds $1 billion annually, all Albertans pay for the negative consequences of tobacco use. 

Despite the enormous burden that tobacco places on society and our healthcare system, tobacco companies are presently not required to pay any compensation for harm beyond general corporate and payroll taxes. These companies are located outside of Alberta so consequently the provincial taxes that they do pay are negligible. The vast majority of tobacco taxes are paid for by consumers, not tobacco companies. 

The Government of Alberta’s $10 billion lawsuit filed against fourteen Canadian and international tobacco firms in 2012 outlines the harmful activities conducted by the tobacco industry. The lawsuit is an attempt by the Government of Alberta to recover decades worth of public harm and the resulting healthcare costs. 

Many Alberta businesses are required to pay for the provincial clean-up costs resulting from their harmful and negligent activities, whether the damage is deliberate or not. Examples include:

•    Oil and gas companies – are required to pay for the mitigation of environmental damage and emissions resulting from mining, extraction and refining. 
•    Trucking and rail companies – are required to pay for the clean-up costs resulting from collisions, derailments, and chemical spills. 
•    Utility companies – are required to mitigate air pollution including CO2 and SO2 emissions resulting from power production.
•    Auto insurance carriers – are required to pay for the healthcare costs resulting from motor vehicle collisions. (1) 

This same “polluter pays” principal can be applied to tobacco companies. Like the examples provided above the Government of Alberta can recover the cost of health services caused or contributed to by a tobacco-related wrong under the Crown’s Right of Recovery Act. It is under this Act that the Government of Alberta sued the tobacco companies in 2012. The Crown’s Right of Recovery Act can also be used to recoup current health care costs and the annual cost of implementing initiatives outlined in the Alberta Tobacco Reduction Strategy (ATRS). 

Action on Smoking and Health (ASH Canada) has determined that a tax of 5% on tobacco industry revenues ($573 million in 2018(2)) would cover the $28 million annual cost of implementing the Alberta Tobacco Reduction Strategy. This strategy outlines steps to:
•    help Albertans to quit using tobacco
•    reduce second-hand smoke exposure
•    make tobacco products less attractive to youth
•    educate youth on the dangers of tobacco use

ATRS focusses on reducing the number of Albertans who use tobacco. The original 2002 strategy is credited with significantly decreasing the number of people who start to use tobacco and helping people who use tobacco to quit. The goal of the strategy is to create a smoke-free Alberta. Funding for the ATRS is no longer included in the provincial budget. When the strategy was first introduced it was funded at a level of $12 million annually. Since 2008 approximately $4 million, or one dollar per capita, is spent on anti-smoking efforts in the province.  

The ATRS expires in 2022. The Government of Alberta should begin consultations on next steps to develop a new strategy in late 2021 that will potentially also address vaping and vaping products. 

(1)    Campaign for a Smoke-Free Alberta, Tobacco Industry Health Cost Recovery Fee, August 2020
(2)    Health Canada, August 2019

Government Response

The Minister of Health’s response (Attachment 2) indicates that “a review of this legislation has determined it is not a good fit for the purpose you have suggested. Additional complexities preclude us from using this approach and we will not be pursuing it at this time.” The Minister does acknowledge that a provincial strategy is required to support Alberta's tobacco and vaping control legislation. He further notes that the current strategy, Creating Tobacco-free Futures: Alberta's Strategy to Prevent and Reduce Tobacco Use, was introduced in 2012 and is due to expire in 2022, so the provincial government will be renewing the strategy over the coming months.

Alberta Municipalities notes

The Crown’s Right of Recovery Act extends to the province of Alberta a "direct and distinct action against a manufacturer to recover the Crown's cost of health services caused or contributed to by a tobacco-related wrong" (Section 42). Although every province in Canada has enacted legislation permitting them to sue tobacco companies, only British Columbia, New Brunswick, and Ontario have filed lawsuits. As could be expected, the tobacco companies implicated in the lawsuits have mounted challenges and these cases are currently before the courts. It is likely that Alberta and the other provinces that have not yet filed lawsuits are awaiting the courts' decisions.

Accordingly, the ABmunis Board has approved categorizing the response as “intent not met – further action will not be taken.”