Canada Revenue Agency

Canada Revenue Agency

July 31, 2008 12:12 ET

Federal and Provincial Governments Reach Landmark Settlement With Tobacco Companies

LEVIS, QUEBEC--(Marketwire - July 31, 2008.) - The Honourable Gordon O'Connor, Minister of National Revenue today announced that the federal and all provincial governments have entered into civil settlement agreements with Imperial Tobacco Canada Ltd. and Rothmans, Benson & Hedges to resolve all potential civil claims they may have in relation to the two companies' role in the movement of contraband tobacco in the early 1990s.

In addition to the civil settlement, the two companies each pleaded guilty in court to a single count of "aiding persons to sell or be in possession of tobacco products manufactured in Canada that were not packaged and were not stamped in conformity with the Excise Act and its amendments and the ministerial regulations" between 1989 and 1994. The fines in these prosecutions, combined with the civil settlements, will result in the companies paying $1.15 billion to governments.

"Today's announcement sends a strong message that all governments are united in their determination to address the problems and challenges posed by the contraband tobacco market. Governments are taking action so that no one will profit from evading Canada's tax laws," said Minister O'Connor. "We are satisfied with the terms of the agreements and are confident that the public interest is protected as a result."

The comprehensive settlement agreement also includes a compliance protocol which will ensure that the companies have effective internal compliance controls in place. It also requires the companies to provide governments with information to assist in the battle against contraband.

"The agreements reached with Imperial Tobacco Canada Ltd. and Rothmans, Benson & Hedges reflect their recognition of governments continuing commitment and ongoing efforts to fight contraband tobacco in Canada," said O'Connor. "The civil settlements require the companies to make payments in the approximate amount of, respectively, $400 million and $450 million over 15 years, as well as a commitment to implement effective programs to control the movement of tobacco products and combat contraband."

The CRA is responsible for administering the agreements. Payments received from the companies will be distributed to federal and provincial governments according to percentages agreed upon by all governments. The settlements announced today are the collective efforts of 11 governments working together to resolve issues that have been outstanding for more than a decade.

For more information about the agreements, see the attached backgrounder or visit the CRA's Web site at cra.gc.ca.

BACKGROUNDER

Federal and provincial governments enter into civil settlement agreements with two tobacco companies

Payments

The payments to be made by Imperial Tobacco Canada Ltd. and Rothmans, Benson & Hedges Inc. as a result of civil settlements and criminal pleas entered in court on July 31, 2008 will be distributed to the governments over the next 15 years, based on percentages to which all participating governments have agreed. The payments will be distributed as follows:



Total estimated amount
Share of payments (in Canadian dollars)
-----------------------------------------------------------------------
Alberta 1.545% $17.0 million
British Columbia 4.200% $46.2 million
Manitoba 1.055% $11.6 million
New Brunswick 2.000% $22.0 million
Newfoundland and Labrador 2.050% $22.6 million
Nova Scotia 2.500% $27.5 million
Ontario 14.267% $156.9 million
Prince Edward Island 0.261% $2.9 million
Quebec 19.134% $210.5 million
Saskatchewan 0.727% $8.0 million
Government of Canada 52.261% $574.9 million


The CRA is responsible for administering the agreements, including the distribution of the payments received from the companies to federal and provincial governments.

Tobacco Compliance Measures

The companies have committed to a compliance protocol that recognizes a common objective to implement efficient and effective programs to control the movement of tobacco products and combat the contraband market.
These programs include:

- Recognition of both governments' and companies' ongoing efforts to enhance compliance with existing laws and regulations to control the movement of tobacco products and combat contraband.

- A 'Know Your Customer' Program to enhance accountability for the distribution of tobacco products throughout the supply chain.

- Further measures such as the establishment of internal compliance programs, anti-money laundering procedures, enhanced information sharing, and increased oversight of tobacco production at companies' foreign facilities.

For more information

The civil settlement agreements and related documents are available on the CRA Web site at www.cra.gc.ca.

Contact Information

  • Office of the Minister of National Revenue
    Ann Matejicka
    Director of Communications
    613-995-2960
    or
    Canada Revenue Agency
    Jacqueline Couture
    Media Relations
    613-952-9184