Government Tobacco Tax Hikes Punish Law Abiding Store Owners While Funding Organized Crime Groups

Federal and Provincial Tax Increases Escalating Illegal Contraband
Levels in Ontario

TORONTO, March 1, 2018 /CNW/ - Tobacco tax hikes announced in this week's federal budget will deal a severe financial blow to convenience store owners by fueling the demand for cheaper illegal cigarettes, according to the Ontario Korean Businessmen's Association (OKBA), the largest organization of independent convenience stores in the province.

The 2018 federal budget announced an additional $1 in tax per carton of cigarettes, as well as inflation adjustment that adds another $1.29 in tax per carton. The increases announced in this week's budget come right before the Ontario government is planning to introduce another $4 per carton hike in their upcoming provincial budget.

"This federal tax hike, combined with the recent provincial increase will raise a carton price by $6.29. This will undoubtedly drive more convenience store owners out of business and drive more smokers into the black market of contraband tobacco," says Don Cha, General Manager of the OKBA. "Already governments lose more than $1B in tobacco taxes when consumers buy their products from the black market. These tax increases will cause them to lose even more money that could be put to good use," he added.

A study conducted late last year on behalf of the Ontario Convenience Stores Association (OCSA) revealed that nearly 40% of all tobacco products consumed in Ontario is illegal. According to the study, illegal cigarettes now account for 37.2% of all cigarettes smoked in the province. The study also showed that the level of contraband tobacco in Ontario has been rising at an alarming rate over the past three years.

"The budget speech this week said that tobacco taxation is known to be one of the most effective ways to keep tobacco products out of the hands of young people," said Cha. "But that's simply not true. The reality is that repeated government tax hikes mean the price gap between legal tobacco and contraband tobacco continues to grow larger and larger, and that makes illegal cigarettes financially more available, especially to lower-income residents and minors." Cha pointed to the 2017 OCSA contraband tobacco study that showed high schools reported the biggest year-over-year increase in contraband levels in terms of locations across the province where illegal cigarettes are found.

Cha added that it was hypocritical of the government to avoid overly expensive pricing for marijuana in order to prevent the growth of illegal sales. Said Cha: "In speaking about the sale of legal marijuana recently, the Prime Minister pointed out that if prices for legal and contraband tobacco were even, people would chose to 'buy legal'. The same standard should apply to tobacco as well."

To learn more about OKBA and the group's campaign to keep Ontario convenience stores from being driven out of business by government policies, please visit: www.saveourstores.ca.

SOURCE Ontario Korean Businessmen's Association

Peter Seemann, Email: [email protected], Mobile: [phone]