Rob Cunningham

In Canada, national regulations have been adopted requiring tobacco companies to reimburse to the Canadian government the annual costs of tobacco-related expenses in the national tobacco control strategy. This tobacco manufacturer cost recovery fee, which implements the principle of polluter pays, will require companies to pay proportionately based on their market share.

The final regulations, the Tobacco Charges Regulations, were announced on 7 March 2025 by Minister of Mental Health and Addictions and Associate Health Minister Ya’ara Saks and published in the Canada Gazette on 26 March 2025 together with the accompanying Regulatory Impact Analysis Statement.

The expenditure areas for which costs will be recovered include: cessation programs; mass media and other communication campaigns; compliance and enforcement; research; publicly releasing industry reports filed with the Canadian Department of Health (Health Canada); regulatory development; Indigenous initiatives; departmental overhead costs; and international work related to the FCTC. The national regulations recovering annual strategy costs incurred by Health Canada are different from and complementary to provincial government lawsuits to recover tobacco-related health care costs.

The annual budget for the Canadian government’s tobacco control strategy is CAD $66.2 million (USD $47.7 million). While the new regulations will require reimbursement from tobacco companies of tobacco-related expenditures in the national tobacco control strategy, vaping-related expenditures will not be recovered initially. Health Canada has indicated that recovery of vaping-related expenditures from vaping companies will take place in a subsequent second phase. It has not yet provided timing for the second phase nor a breakdown between the tobacco and vaping expenditure portions of the strategy. Government expenditures related to tobacco contraband (such as by the Canada Revenue Agency and the Royal Canadian Mounted Police) are not being recovered.

The first annual fee must be paid by each tobacco company by 30 November 2026. This is to reimburse tobacco-related strategy expenses for the 2025-26 government fiscal year ending 31 March 2026. Beginning 30 April 2026, companies must file an annual statement of sales and revenue for the 12-month period ending March 31, 2026. Health Canada will use this information to prepare invoices for each company. In subsequent years, the statement of sales and revenue is required by April 30 and the fee payment is required by November 30. By 30 November 2028, and every subsequent November 30, Health Canada must publicly disclose the names of the companies required to file statements of sales and revenue to pay the fee, as well as those that did not pay required fee, and action taken regarding such non-payment. The Canada Revenue Agency has been authorized to share tobacco sales information with Health Canada to assist with enforcement.

The process leading up to the national regulations has been a long one. Various health organizations have advocated for a tobacco manufacturer cost recovery fee for many years. In the campaign for the 21 October 2019 national election, the opposition Conservative Party platform included a fee to recover the annual $66 million cost of the national tobacco control strategy. On 12 November 2020, the health critic for the opposition New Democratic Party introduced a House of Commons motion calling for such a fee (the same motion would be re-introduced on 1 December 2021). In February 2021, the House of Commons Standing Committee on Finance recommended a tobacco manufacturer cost recovery fee. In the campaign for the national election held 20 September 2021, the governing Liberal Party the opposition Conservative Party and the New Democratic Party each included a fee to recover the $66 million strategy cost.

Following the election, on 16 December 2021, Prime Minister Justin Trudeau included the tobacco cost recovery fee in the mandate letter to the Associate Minister of Health. Enabling legislation amending the Tobacco and Vaping Products Act to authorize the adoption of regulations was adopted by Parliament on 20 June 2024, with unanimous, all-party approval of these provisions at third reading in the House of Commons by a vote of 318-0 on 28 May 2024. Health Canada launched a public consultation on draft regulations on 1 August 2024, with the consultation ending on 10 October 2024.

The new Canadian regulations are of international significance. The only other country known to have adopted a similar fee is the United States. The fee is not an earmarked tax (sometimes referred to as a dedicated tax or a hypothecated tax), nor any other type of tax. Rather it is a fee (or a “charge”) to recover expenditures incurred. The United States has had a cost recovery fee (referred to as a “user fee”) in place nationally since 2009, recovering from tobacco companies based on market share the annual cost of the tobacco control budget of the Food and Drug Administration, which in 2024 was USD $712 million.

Canada’s tobacco manufacturer cost recovery fee helps to hold the tobacco industry accountable for decades of wrongdoing. The tobacco industry has caused the tobacco epidemic and should be responsible for the costs of responding to the epidemic, instead of all taxpayers. The recently adopted Canadian approach can be an example for other countries.

Rob Cunningham

Senior Policy Analyst, Canadian Cancer Society