OTTAWA – The growing problem of contraband tobacco is spiralling out of control, costing billions of dollars in lost tax revenue, and imposing high social costs on Canadians, according to the country’s leading tobacco company and other groups who say the federal government isn’t doing enough to combat it.
A study conducted for cigarette manufacturers found about 30 per cent of tobacco bought in Canada is bought illegally. In Quebec and Ontario, where most of the problem lies, the rates hover around 40 and 50 per cent, respectively. The problem is getting worse, and an estimated 13 billion illegal cigarettes were bought in 2008, up from 10 billion a year earlier.
"It really has gotten out of control in the last few years," said Catherine Doyle, manager of corporate communications at Imperial Tobacco Canada. "Obviously, we’re interested in it because it affects our business, but there are many more consequences," she said.
Tobacco companies lose out on about $900 million a year due to smuggled, counterfeit and other illegal tobacco products. Convenience stores and other retailers miss sales, and between the federal and provincial governments, an estimated $2.4 billion is lost in tax revenue. Beyond the financial costs, critics say more action is required because of the public safety and health risks associated with contraband cigarettes.
Often sold in baggies for as little as $6 for 200 cigarettes, they come with no health warnings or ingredient listings. Young people who buy them are not asked for identification – as stores selling legal tobacco are required to do – and the trade is known to be linked to organized-crime networks that also deal drugs, weapons and alcohol.
"It’s an issue that should have been dealt with long before now and . . . Canadians are paying a very serious price, both economically (and) in terms of the safety and security of our citizens," said Perrin Beatty, president and CEO of the Canadian Chamber of Commerce.
His is one of many voices calling on the federal government to take more leadership in attacking the problem.
The federal government, however, says it’s paying attention to the problem. Last May, it set up an interdepartmental task force involving Health Canada, the RCMP, Canada Border Services Agency, Canada Revenue Agency, Finance Canada, Agriculture and Agri-Food Canada, and Indian Affairs and Northern Development Canada. The RCMP also launched a Contraband Tobacco Enforcement Strategy.
"We have done some things, maybe not enough because, obviously, it continues to be a problem, but the RCMP has increased their seizures tremendously over the past year, and I think that that aspect is certainly working," said Conservative MP Dave MacKenzie, parliamentary secretary for public safety.
According to the RCMP, most contraband tobacco seized in Canada originates from the American side of the Akwesasne Mohawk territory, a reserve that straddles the borders of Quebec, Ontario and New York. Tackling the problem therefore requires co-operation from several levels of government and, according to some, it’s taking far too long for that to happen.
"To me, it is inexplicable why it has taken the federal government so long to implement available concrete measures," said Rob Cunningham, senior policy analyst with the Canadian Cancer Society. "That task force has been in existence for almost a year. What exactly has it delivered? We need action."
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