Tobacco Tax Increase Will Hand Millions of Dollars to Underground Economy, says NCACT
Toronto - With the release of the Ontario budget, the National Coalition Against Contraband Tobacco (NCACT) warned that the government's decision to increase tobacco taxes by $3 per carton will heighten demand for contraband tobacco in the province and be a boon for criminals profits.
"Once again, the Ontario budget is making province's contraband tobacco problem more lucrative and not letting enforcement measures have an effect," said Gary Grant, a 39-year veteran of the Toronto Police Service and national spokesperson for the NCACT. "With 1 in 3 cigarettes purchased in Ontario already contraband, an increase in the price differential between legal and illegal product will make it easier for the 175 criminal gangs involved in the trade to profit and fund their other illegal activities, including guns, drugs and human smuggling. Sadly, law abiding Ontarians won't fare as well."
In addition to reiterating past commitments, the budget did propose immediate legislative amendments that, if passed, would allow for the forfeiture of raw leaf tobacco. This initiative could create new deterrents to engaging in contraband tobacco distribution. Ontario has the worst illegal cigarette problem in Canada, so measures will take time to have an effect.
"The Ontario government has offset any gains from new enforcement measures by introducing a parallel tax increase at the same time," said Grant. "Ontario would have been wiser to allow new enforcement measures, like the new Contraband Tobacco Enforcement Team, to disrupt the illegal networks first, leading to more effective contraband reduction. Large tax increases such as this drive consumers to seek less expensive alternatives which is counter-productive to the province's contraband enforcement commitment."
Contraband cigarettes are produced in 50 illegal factories in Canada, largely in Ontario and Quebec. Each can produce millions of cigarettes in a day. Contraband tobacco is also a major drain on the public purse. Contraband tobacco was identified as a key area of loss to the underground economy in the Drummond report and the Canadian Taxpayers Federation has estimated that illegal cigarettes cost Ontario taxpayers as much as $1.1 billion in lost revenues each year.
"Tackling illegal cigarettes is good for Ontario communities. It hurts organized crime and helps to make tobacco control regulations more effective," continued Grant. "Real measures against contraband, including awareness campaigns for the public, more powers to police, and measures to make it harder to manufacture contraband cigarettes must be put in place to address this problem. Waiting only means that Ontario suffers while criminals benefit."
The National Coalition Against Contraband Tobacco is a Canadian advocacy group formed with the participation of businesses, organizations and individuals 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, United Korean Commerce and Industry Association (UKCIA), and National Capital Area Crime Stoppers.