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Tax Gap of Heated Tobacco Products in Canada
Heated tobacco products were introduced in Canada in late 2016 by Rothmans, Benson & Hedge (RBH), the Canadian subsidiary of Philip Morris International (PMI), under the brand name HEETS (heated cigarettes used with IQOS devices).
Although e-cigarettes were introduced in the federal tax system by the 2022 Budget (effective October 1st, 2022), heated tobacco products are taxed by default under the existing category of “Manufactured tobacco other than cigarettes and tobacco sticks.” This is also the category for “other tobacco products” (e.g., pipe tobacco or fine cut). Nevertheless, several provinces have included heated tobacco and e-cigarettes in provincial tax systems (see methodology)
The Canadian federal tax system for cigarettes includes a specific tax administered and collected at the national level. In addition, each province applies its own specific excise tax on all tobacco products, which varies by province.
For the fiscal year starting April 1st, 2023, the federal tax rate for heated tobacco is CAD 9.89524 per package of 50 grams or fraction of 50 grams contained in a package (same as other manufactured tobacco). Given that a pack of 20 HEETS contains about 6.1 grams of tobacco, a specific excise tax of CAD 1.2217 is applied per pack of 20 HEETS.* As of May 2023, only four provinces have amended their tax system to include heated tobacco products, and apply a specific tax based on sticks. All other provinces tax heated tobacco under the same category as “other tobacco”.
By contrast, the federal excise tax rate on cigarettes, as of April 1st, 2023, is CAD 0.15832 per cigarette (CAD 3.1664 per pack of 20 cigarettes).
See more details in the methodology
Sources:
*Physicians for a Smoke Free Canada assume an equivalency ratio of 6.2 grams of tobacco per pack of heated tobacco products. For consistency across countries, CTFK’s interactive maps, we use an equivalency rate of 0.31 gr per stick, as found from several other sources including PMI. For more details, see methodology.
Last updated Sept. 1, 2023