More for Less

Canada, which has had singular success in maintaining a budget surplus, last week was demonstrating one way to get more government revenues: cut taxes. In April 1951, Canada increased its already high cigarette tax by 3-c- a pack, to 25-c-. This gave the smuggling of cigarettes such a boost (an estimated 18% of legal sales) that annual revenues from the tax dropped $4,700,000 to $169.8 million. A year later, Canada removed the 3-c- tax increase; government revenues went up $9,400,000 for the year. But smugglers were still busy.

Last February Canada lopped another 4-c- from the tax. This time, manufacturers joined in, cut their prices by 2-c- a pack. Sales boomed. In the first half of this year, legal cigarette sales were 15% higher than a year ago. Last week Imperial Tobacco Co. of Canada Ltd., the country's biggest, reported that cigarette sales for the five months from March through July were up 18 1/2% from last year, and police seizure of smuggled cigarettes dropped almost 50%. And the government hopes the tax cuts will bring another increase in revenues.

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