Canada’s illegal cigarette trade is soaring out of control — and governments at all levels are reluctant to do anything about it.
Imperial Tobacco says the problem is exploding.
Last year, one-third of all cigarettes in Canada were sold illegally. In Ontario, it skyrocketed to almost half — 48%.
The year before, the figure was roughly 22% across Canada, with just over 30% in this province.
“A lot of people’s livelihoods are at stake here,” says Imperial Tobacco President Benjamin Kemball.
It’s not just tobacco manufacturers who are hurting. Most convenience stores rely on tobacco sales for 30% of their profits.
“The sharp spike in illegal sales is eating into those profit margins and putting independent stores out of business,” Kemball noted.
Despite the massive loss of tax revenues due to illegal smokes, he noted, governments are “in denial.”
Kemball estimates governments across Canada are losing roughly $2.4 billion a year in uncollected tobacco taxes and that Ontario’s share of that is about $1.1 billion.
Last year, Ontario’s auditor general reported that in 2006/07 fiscal year, the loss to the province was $500 million.
“We believe it has doubled in that time and most of the figures would confirm that,” Kemball said.
While governments publicly pat themselves on the back for reducing the sale of legal tobacco, data shows those people are still smoking — they’re just buying more smokes illegally.
“All the government has done is create the largest illegal tobacco market in this hemisphere, including Latin America,” Kemball said.
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Too high a level of taxes always breeds a counter-reaction, in this case trafficking of illegal cigarettes.
But there is also another element in the trafficking not touched upon by the article, namely the role of Native Canadians and the reserves close to the US border.
People have had enough of the nanny state. We are not in prison where you can regulate our every move. I fear this is only a start, wait until cap and trade starts up, think of the stolen electricity as people on fixed incomes find it unaffordable. Support your local indian reserve!
The pesticide business is another possibility for Ontario reserves to consider.
Is there some kind of tobacco that can kill clover?
This is terribly old news in Canada. I can say without fear of contradiction that illegal cigarette smuggling was a huge and I mean HUGE problem for the government 20 years ago. So were illegal firearms. Both remain so today so why the fuss all of a sudden? Trust the MSM to be right there on top of another ‘breaking news’ story.
The tobacco fields that saturate and surround the Six Nations of the Grand River reserve near Caledonia Ontario go on for as far as the eye can see. Why would anyone go to the trouble of smuggling tobacco across the border when they could just take a few steps out from their front door and pick all they want?
“The general public sees this as sticking it to the tax man and that it’s their right to buy cigarettes at low prices (because) the government is over-taxing them,”
The general public is right.
Tobacco taxes have risen to the point where they have created a de facto prohibition. Therefore, smugglers and organized crime will step into the void. Simple as that. Harris understood this in 1995 when he lowered cigarette taxes as one of his first orders of business.
Tax tobacco – yes, but only to the point where cigarettes are just cheap enough to render the majority of black market smokes uneconomical. Any higher than that, the government creates an incentive to get into the black market tobacco business, undermining it’s own policies.
#6. Actualy ‘back then’ tobacco (not all of it but a considerable amount) was smuggled from Canada into the USA where it was processed into regular looking in every sense of the word looking cigarettes and packaged using commerical cigarette making machines. The finished product was then smuggled back into Canada by the semi-truck load or smaller loads by a variety of other modes. Native Reserves in the state of New York were into the cross border operation in a big way and one particular Canadian Mohawk in Ontario family was a household name amongst commerical anti-smuggling police. When a U.S. Indian Reserve shares a common border with a Canadian Indian reserve and there are no border police….well you get the picture. It was organized crime in every sense of the word and insanely profitable.
#7. Exactly right. The few (by comparison to the volume) tobacco smugglers that did or do get caught do not suffer the stigma such as those caught drug trafficking by any means. They’re looked at more so as modern day Robin Hoods by the smokers and the goverment as the Sheriff of Nottingham.
Indeed…and until the government wises up “illegal smokes” are going to make many people very rich.
It may surprise “lefties” in this country but you can’t tax tobacco out of existence. That has been tried and it has failed.
No 8 is right.
“Stupidity is as stupidity does.”
You want to kill smokes? Reduce taxation and increase student education.
It’s the only way and we’ll be awhile because it takes time.
So, where do you buy this non-taxed tobacco?
Um, no, tobacco is an insecticide, not a herbicide. Search, there’s a number of well-recommended recipes. So, if I have a garden, can I buy non-taxed tobacco, like non-taxed alcohol?
Wasn’t Imperial Tobacco fined because they were manufacturing the cigarettes for export (to the USA) and the natives were smuggling them back? I never did understand why Imperial Tobacco was fined when they did everything legally. Just a soft-target I guess. Anyway, that was stopped and … up jumped The Law, of Unintended Consequences.
Sin taxes are popular ways to raise revenue and if people start revolting against taxation, governments will be in trouble… For instance, how much of the cost of gasoline is taxation? How much of the cost of alcohol is taxation?
Anyone for a cup of tea?
Why has the Indian smokes become so popular in the first place ? Because our greedy government decided to violate our rights to smoke by placing phenomenal taxes on legal cigarettes. Do only the rich in this country have the right to smoke ? No matter how much the government wants a smoke -free country it again is OUR CHOICE and OUR RIGHT to light up. After all ,was it not the government that made smoking tobacco legal in the first place ? Now after all these years and all those tax dollars collected, they think everyone can just stop. It was they who allowed and condoned the addiction now they have to tolerate it. Lower the taxes on legal smokes to affordable pricing and give the people of this country the choice to quit or smoke after all it is THEIR CHOICE not Ottawa’s. In the mean time with so much unemployment in this country and costs to live so high what else is a person to do but buy as cheap as they can for anything, not just smokes. Once again our economy is the way it is thanks to our LEADERS , the people who need to make 6 and 7 figure digit incomes while we the people that pay those wages can barely afford to live. Oh they should be proud !!!!