"The cheap smokes are being manufactured in unlicensed factories on first nations reserves in Ontario, Quebec and New York state, then shipped by car, truck and motor home through Eastern Canada and increasingly into the West, particularly B.C. and Manitoba."
Contraband cigarettes make their way to Western Canada (external - login to view)
Contraband cigarettes make their way to Western Canada
Cheap illegal smokes mean lost tax revenue, increased organized crime and easier access to tobacco for young people
By Barbara Yaffe, Vancouver SunApril 8, 2010
Contraband cigarettes, which account for nearly half the Quebec and Ontario markets, are starting to make their way into Western Canada.
Imperial Tobacco has labelled the illegal trade route the TransContraband Highway, and is calling on Ottawa to step up action against illegal cigarettes.
The cheap smokes are being manufactured in unlicensed factories on first nations reserves in Ontario, Quebec and New York state, then shipped by car, truck and motor home through Eastern Canada and increasingly into the West, particularly B.C. and Manitoba.
Just this year, RCMP raids in Manitoba, in Portage la Prairie and Brandon, turned up large quantities of smuggled cigarettes. In 2008, contraband cigarettes accounted for nearly four per cent of the market in
B.C., up from two per cent in 2007, according to Imperial's figures.
The B.C. problem is exacerbated by shipments of illegal tobacco products entering the province from China, said Eric Gagnon, spokesman for the Montreal-based company.
The cross-Canada problem is huge, and growing. Imperial estimates some 13 billion illegal cigarettes were sold to Canadians in 2008, up from 10 billion in 2007.
So, what's Imperial's interest in talking up this problem?
After all, why should Canadians care if the pedlars of death lose some of their market share (worth about $900 million a year)?
Well, every time someone buys an illegal bag of 200 cigarettes at $6 instead of paying, say, $90 for a legal carton in B.C., tax revenue is lost to government.
Contraband activity throughout the country translates into forgone federal and provincial tax revenue of about $2.4 billion a year.
It also supports organized crime and offers easy and affordable access to tobacco products for young people.
Canada has made strides in recent decades in getting citizens to abandon and avoid the unhealthy, addictive habit. Only 18 per cent of Canadians still smoke.
But the question is, will a proliferation of cheap cigarettes lead to more people smoking, with implications for health care costs?
The Canadian Cancer Society notes smoking levels had been dropping by one per cent annually -- until 2007 when the declines became far more incremental.
The society says on its web-site: "The main reason for the slowing decline has been the availability of cheap contraband cigarettes."
Imperial is urging the Harper government to make the problem a higher priority, to move beyond mere enforcement activity that takes place through the police seizures.
Of course, the fact the illegal products are being produced on native reserves makes the issue tricky. Can you imagine the feds attempting to shut down unlicensed manufacturing operations on native land?
Gagnon suggested Ottawa should hand over to the native manufacturers a portion of tax revenue from the legal cigarette market in exchange for their agreement to stop producing. But that sounds a lot like a bribe, or a reward for bad behaviour.
Another way the feds could put a dent in the illegal activity is by lowering taxes on cigarettes, which in B.C. -- after the July 1 imposition of the harmonized sales tax -- will total about $60 on a $96 carton.
Imperial tried to lobby the Campbell government to exempt cigarettes from the higher tax take that will result from the HST, but without success, said Gagnon, shaking his head.
And while Ottawa insists it's hard at work addressing the issue of illegal cigarettes -- pointing to the 2008 creation of a task force on illicit tobacco products-- Gagnon said the group has "done nothing to date."
Public Safety Canada's David Charbonneau noted the group will be working with the Americans on the matter because it involves cross-border activity.
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