Tobacco company taking Ottawa to court over fee that got unanimous House support

OTTAWA — A major tobacco company is taking the federal government to court over a new fee that would see the industry pay for Ottawa’s tobacco control strategy.

The tobacco cost recovery fee is set to take effect in November, when Ottawa will begin billing the companies annually, starting with $42.5 million this year. The money is earmarked for stop-smoking programs, public education and prevention, and compliance and enforcement activities.

The amount each company would pay is determined by their market share.

JTI-Macdonald Corp. filed for a judicial review in Federal Court in late September, arguing that it believes the fee is unconstitutional.

“Same old, same old tobacco industry,” said Rob Cunningham, a senior policy analyst with the Canadian Cancer Society.

“They have this very long history of bringing legal challenges to strike down tobacco control legislation.”

Cunningham said a similar fee has been in place since 2009 in the United States, and Canada implemented a cost recovery fee for the legal cannabis industry in 2018.

Health advocacy groups argue the fee structure is similar to the “polluter-pay principle” because it imposes part of the cost of a harmful product on those who profit from it.

“We want to hold the industry accountable for their ongoing harm, and we want to move the burden of tobacco control away from the federal government and taxpayers and onto the industry itself,” said Foram Patel, a senior policy specialist at the Heart and Stroke Foundation of Canada.

JTI-Macdonald’s CEO said in a statement the fee amounts to “an unconstitutional, illegal and uncapped tax levied only on legal tobacco manufacturers.”

“This will benefit illicit operators who are unlikely to comply with these regulations, as they already evade taxes and duties, further fuelling illicit trade,” Paul Hennessy said in an emailed statement.

In its court filing, the company said an estimated 30 to 40 per cent of tobacco sales in Canada are in the illicit market.

It also noted the federal government collected $2.6 billion in excise duties from tobacco products in 2023-34 and argued “there is nothing preventing the government” from allocating that money to its tobacco control strategy.

Sarah Butson, CEO of the Canadian Lung Association, said the fee “means that (Canada) can invest in programs that are about improving our enforcement and our compliance and ensuring that our tobacco control system is really robust.”

Butson pointed out newer tobacco products, including nicotine pouches and vapes, are introducing tobacco to new generations and will require a different response.

She also said the amount the government is seeking to recover is “a drop in the bucket” compared to the annual health care costs associated with tobacco use — estimated at $5.4 billion in 2020 — and the overall profits of the industry.

The federal government’s tobacco strategy looks to reduce the share of the population that consumes tobacco to less than five per cent by 2035 — meaning fewer than 1.8 million people would be tobacco users by then. Ottawa set aside $66.2 million a year, starting in 2018, for the strategy.

The idea of recovering those costs from industry has had broad political support for years. The Liberal, Conservative and NDP campaign platforms in 2021 all committed to creating such a fee, and Parliament voted unanimously in favour of its creation in 2024.

NDP health critic Gord Johns said it was one of the “rare occasions when Parliament spoke with one voice.”

“When an industry disagrees with a democratic outcome like this, their answer shouldn’t be to run to the courts in order to delay accountability. It should be to respect the law that was passed,” Johns said in a statement.

A spokesperson for Health Canada said in a media statement the government intends to defend the validity of the law and the regulations that implement the fee.

“Cost recovery minimizes the cost burden on taxpayers and ensures that businesses pay their fair share,” said spokesperson Karine LeBlanc.

This report by The Canadian Press was first published Jan. 21, 2026.

Sarah Ritchie, The Canadian Press