Ontario Budget's Tobacco Tax Increase Will Lead to More Illegal Cigarettes

OTTAWA, May 1, 2014 /CNW/ - The National Coalition Against Contraband Tobacco (NCACT) said that the Ontario budget's tax increase on tobacco products, despite the proposed introduction of new anti-contraband measures, will only make the province's massive illegal cigarette problem worse. Today's budget increased taxes by more than 13% to $27.95 per carton.

"There is already more contraband tobacco in Ontario than any other province, and with this tax increase the problem is only going to get worse," said Gary Grant, a 39-year veteran of the Toronto Police Service and national spokesperson for the NCACT. "Already, a 'baggie' of 200 illegal cigarettes can cost as little as $8; more than $70 less than the price of legal product. A tax increase only makes the criminal market more lucrative."

Illegal cigarettes are a major source of funds for organized crime. The RCMP estimates that there are about 175 criminal gangs that are involved in the contraband trade, using it as a cash cow to finance their other illegal activities, including guns, drugs and human smuggling.

"Contraband tobacco is also a prime source for youth smoking. Illegal cigarettes are cheap, easily accessible, and the criminals who sell them don't check for ID," continued Grant. "The criminals are making a mockery of Ontario's tobacco control regime, and this budget only makes things worse."

The government projects that this tax increase will raise 140 million in 2014-2015. However, the inevitable associated growth of the illegal market caused by this increase will eat into these revenues. In fact, New Brunswick and Quebec, which have thriving illegal cigarette markets, both have had to revise tobacco tax revenue projections downwards after increasing cigarette taxes.

"Contraband tobacco is the low hanging fruit of tax collection. In fact, the Canadian Taxpayers Federation estimates that the illegal cigarette trade in Ontario costs governments more than a billion dollars in lost revenues each year," said Grant. "That's money that could be going to paying down the deficit, but instead lines the pockets of criminals."

Tougher measures in other jurisdictions have resulted in major busts, such as that yesterday in Quebec. This bust seized illegal tobacco that would have led to the manufacture of more than 111 million illegal cigarettes by organized crime, which is just under half of the total seizures over the past 6 years mentioned in today's budget (page 333). While the budget commits to introducing new anti-contraband tobacco measures, including increased fines and impounding vehicles used for smuggling, the Ontario government had previously committed to these measures in 2012 and 2013 with no actual implementation.

"The government has made a number of anti-contraband tobacco commitments in the past few years, but has never done anything to actually implement them, despite this budget recognizing that the supply of contraband tobacco in Ontario is increasing. It is very clear that the government simply is not serious about this problem," said Grant. "Even if these measures are actually implemented, at best they will only offset the effect on contraband tobacco of the tax increase. The status quo is unacceptable; we shouldn't struggle just to remain at this level."

"With this budget, Ontario is taking a baby step forward, but two steps backwards," concluded Grant. "Ontario's Illegal cigarette problem will remain the worst in Canada. Communities will suffer. Taxpayers will suffer. Criminals will prosper."

The National Coalition Against Contraband Tobacco is a Canadian advocacy group formed by organizations and associations concerned about the growing danger of contraband cigarettes. NCACT members share the goals of working together to educate people and urge government to take quick action to stop this growing threat.

The members of the NCACT are: Association des détaillants en alimentation du Québec (ADA), Association des marchands dépanneurs et épiciers du Québec (AMDEQ), Canadian Chamber of Commerce, Canadian Convenience Stores Association (CCSA), Canadian Manufacturers and Exporters, Canadian Taxpayers Federation, Canadian Tobacco Manufacturers Council, Conseil du patronat du Québec (CPQ), Customs and Immigration Union, Échec au crime Québec, Fédération des chambres de commerce du Québec (FCCQ), Frontier Duty Free Association (FDFA), National Convenience Stores Distributors Association (NACDA), Ontario Chamber of Commerce, Retail Council of Canada, Toronto Crime Stoppers and United Korean Commerce and Industry Association (UKCIA).

SOURCE National Coalition Against Contraband Tobacco (NCACT)

For further information: Michael Powell, (p) 1-866-950-5551, (m) 613-797-7313, (e) info@stopcontrabandtobacco.ca