Billions of dollars in taxes could go up in smoke as $13.5B judgment weighs on tobacco industry

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The industry’s demise would have a major impact on the nation’s finances, the revenue stream cigarette sales provide to Aboriginal people, and lead to a potential boom in the illicit tobacco …

A $13.5 billion judgment against Canada’s Big Three tobacco companies has forced them into the largest and most complicated restructuring proceedings this country has ever seen — with implications that could dig deep into the nation’s pockets.

“Imperial Tobacco’s contribution alone is approximately $4 billion,” said Eric Gagnon, head of corporate and regulatory affairs at Imperial Tobacco Canada Ltd., which boasts a 48 per cent market share. While the Court of Appeal reduced the total damages by about $2 billion, the actual amount payable by each company is likely a moot point as the law imposes what lawyers call “joint and several” liability, meaning that if any of the three companies is unable to pay its portion of the judgment, the others must come up with the balance — if they can.

Enter the international parent companies. The general rules of corporate law suggest that they are under no obligation to pitch in. But practical realities, including the international scope of tobacco litigation, suggest that they have no choice. “However,” he added in an email, “they are participating in this process and seek the same objectives, a global resolution to the litigation.”

 

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