The 2014 budget's tobacco tax increase will not bring additional revenues to the government but it will be a catalyst for growth of contraband
MONTREAL, May 2, 2014 /CNW Telbec/ - The Ontario government has decided to ignore the prevalence of contraband tobacco in the province and acted in a counterproductive and irresponsible manner by raising tobacco taxes.
"The tobacco tax increase is simply bad public policy," says Eric Gagnon, Director, Corporate Affairs for Imperial Tobacco Canada. "If the Wynne government thinks it will increase revenue and deter smoking, it is sadly mistaken. History has shown, in markets with a contraband problem like Ontario, increases in tobacco taxes lead only to a portion of consumers turning to the black market."
Ontario is considered 'ground zero' in Canada's contraband tobacco market with more than 150 smoke shacks and growing production capacity. Illegal cigarettes are produced in facilities that are unlicensed, unregulated and uninspected. Because they are sold without any taxes, they are purchased illegally for a fraction of the price of legal products.
"The Federal Government tobacco tax increase in February has already stimulated the illegal markets in Ontario and Quebec, this short sighted decision by the Ontario Government will only exacerbate the situation and continue to drive more consumers to the unregulated illegal market," says Gagnon. "Quite frankly, we're appalled with the Ontario Government. We are still waiting for the government to deliver on its promise of addressing the contraband tobacco market. Instead, not only has the government failed to address the issue, they have chosen to make it worse. Welcome to the more perverse side of Canadian politics."
It is estimated that the provincial and federal governments are losing billions of dollars annually in tobacco tax revenues due to contraband tobacco sales in Ontario. Further, a study from the Ontario Tobacco Research Unit suggested that the contraband tobacco market undermines all government's smoking cessation efforts.
"The contraband tobacco market hurts everyone," concludes Gagnon. "It allows criminal networks to bypass all regulations that govern the sale of tobacco products in Canada. These illegal operators have no issue selling products to youth, they don't collect government taxes, and they endanger the safety of our communities."
SOURCE: Imperial Tobacco Canada
For further information: Sebastien Dolan, Corporate Affairs, 514-932-6161 ext: 2222, www.imperialtobaccocanada.com