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Quebec government wins settlement against tobacco giant

Quebec David Spurgeon

The government of Quebec has obtained a court judgment ordering the tobacco giant JTI-Macdonald to pay nearly $C1.4bn (£0.6bn; $1.1bn; £0.9bn) in taxes immediately, the largest assessment for unpaid taxes in the province’s history.

The order follows the federal government’s claims last year of unpaid taxes (BMJ 2003;326:570) on large numbers of Canadian cigarettes bound for the United States that were smuggled back into Canada and were sold illegally and free of tax in the 1990s.

The company can contest the judgment but has to pay first, says a Montreal tax expert. The government has a range of options if the company does not pay, including seizing revenues from retailers and seizing or mortgaging company property. Other provincial governments have similar tax laws.

The Quebec government says it lost more than C$1bn in tax revenue related to tobacco between 1990 and 1994, when as much as 60% of tobacco products consumed in the province were contraband. In the 1990s high taxes on tobacco products led to an extensive black market. Some tobacco executives are accused of involvement in the black market, and the government claims that tobacco companies profited from it.

The company says the government’s action "is extraordinary and all the more disturbing as it ignores the presumption of innocence." It said it is studying the situation and will take all necessary and appropriate measures "to defend its lawful business."

Garfield Mahood, executive director of the Non-Smokers’ Rights Association, applauded the Quebec government’s action and urged other provinces to follow suit. He says the C$1.36m in unpaid taxes, penalties, and interest that Quebec claims is owed by the company belongs to the citizens of the province.

A similar lawsuit filed in the United States by the federal government failed in November 2002 when a New York court said it had no jurisdiction over a Canadian tax dispute.
 
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