June 27, 2009 - Canada's illegal (illicit, contraband) 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. "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.
Most convenience stores rely on tobacco sales for 30% of their profits.
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.
While the problem originates on native reserves and in smoke shacks, not all reserves are to blame, Kemball said. Places like Six Nations and Akwesasne continue to be a problem, but many other reserves obey the law and demand ID for their on-reserve sales. On most reserves, only buyers with first nation status are allowed to purchase cigarettes without paying tax. Everyone else pays and those revenues are shared between the government and the reserve.
Kemball says the market has been taken over by organized crime with the criminals also selling guns, cocaine and marijuana.
"You now have Ontario's youth buying tobacco products without any restrictions or controls from dealers who are also trafficking (in) alcohol, drugs and firearms," Kemball said.
Sgt. Mike Harvey of the Cornwall Royal Canadian Mounted Police (RCMP confirms that. He says 25 criminal groups are involved in the illicit tobacco trade in the local area alone. With cigarettes selling illegally for as little as $10 a carton, it's mostly kids who are buying. "They're recruiting youth to transport the cigarettes from the Akwesasne Mohawk territory to smoke shacks in other aboriginal communities," Harvey said.
In one case, a 17 year-old girl was making $6,000 a week doing that and used the money to finance her drug addiction.
"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," he said. "They are really financing organized crime groups, who are using this money to produce drugs such as Ectasy and meth labs across Canada."
I don't smoke. I don't like people to smoke around me. But if people are going to buy a legal product, they should do so legally. This week, the UN said Canada is a "primary source" of Ecstasy and methamphetamines.
As long as governments refuse to deal with the illicit tobacco trade, we'll continue to be the party drug dealer of choice to the world.
Reference: Smoke 'em if you swiped 'em Illegal sales of cigarettes soar in Ontario, while corner stores and tax coffers suffer by CHRISTINA BLIZZARD, Toronto Sun, 6/26/2009; Illegal smokes start lot of fires Posted by CHRISTINA BLIZZARD, The Sun Times, 6/26/2009.
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