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Illegal Cigarettes Remain the Defining Tobacco Control Problem in Ontario

The National Coalition Against Contraband Tobacco (NCACT) responded to a report by the Ontario Tobacco Research Unit (OTRU) that minimized the extent of contraband tobacco’s incidence and impact in Ontario, including the connection between increased taxes and rising contraband tobacco rates.

Contraband tobacco is any tobacco product that does not comply with federal and provincial tobacco regulations and pay all duties and excise taxes. It is a cash cow for organized crime, with the RCMP estimating that 175 criminal gangs use the trade to finance their other illegal activities, including guns, drugs and human smuggling. Hundreds of millions of cigarettes make their way into Canadian communities each year, produced at 50 illegal factories, each of which can produce as many as 10,000 cigarettes a minute. The scale and ability of these criminal manufacturing facilities is reasonably unique in the world, limiting the usefulness of comparisons to other countries and provinces.

Despite OTRU’s claims to the contrary, contraband tobacco continues to thrive in Ontario. A study by GFK, a global market research firm, found that over the last year an average of 1 in 3 cigarettes purchased in Ontario were illegal. In some months the level was more than 40%. Location-specific butt studies conducted by the Ontario Convenience Stores Association in late 2014 confirmed a high incidence of contraband throughout the province. Indeed, the Ontario government has highlighted the high-levels of contraband tobacco in Ontario, including in the fall economic update.

“The only reason that contraband tobacco exists in Ontario, as the OTRU recognizes, is because illegal cigarettes are available so much cheaper than legal ones,” stated Gary Grant, national spokesperson for the NCACT and a 39-year veteran of the Toronto Police Service. “At more than $70, this price differential, matched with an absence of government intervention, has allowed a criminal manufacturing and distribution network to entrench itself in the province to create a steady supply of cheap and easily available contraband cigarettes. Consumers are easily able to switch to the illegal market when the cost of legal product increases. This is all the more the case given since the combined federal/provincial tax increase in Ontario in 2014 is essentially the cost of a baggie of contraband.”

Importantly, the OTRU report also assumes that a tax increase will have only a minimal increase in contraband tobacco levels provided if more stringent anti-contraband measures are also introduced. Unfortunately, Ontario has thus far refused to introduce meaningful anti-contraband tobacco measures, despite commitments to do so in the last 3 budgets. If anything, the province has made the problem worse, with tax increases and a proposed menthol ban that hand more of the legal market to criminals.

“The biggest challenge for tobacco control in Ontario is the contraband tobacco market,” continued Grant. “Without real measures to address it, consumers will continue to have ready access to cheap and plentiful illegal cigarettes, free from any of the regulations that the government has put in place to protect Ontarians. Fortunately for Ontario, the required measures are apparent and proven. They include increased powers and resources for local police, following the model set out in Quebec through Bill 59 and Acces Tabac. They also include stricter controls on non-tobacco cigarette manufacturing materials, including acetate tow. NCACT and other groups, such as the Ontario Campaign for Action on Tobacco, have repeatedly suggested these measures to government, but it has yet to act.”

Quebec’s action against contraband tobacco since 2009 has reduced levels of contraband tobacco by half while increasing provincial tobacco tax revenues. Addressing contraband tobacco as Quebec has done would increase the effective price of cigarettes in Ontario and allow provincial and federal tobacco regulations to do their work. This should be a first step before making other changes to the regulated market.

“Ontario has talked a lot about tackling contraband tobacco, but unfortunately there’s been no real action,” concluded Grant. “Organized crime has filled this gap and consumers can quickly be driven into their arms. It’s time that Ontario take action on this problem.”

National Coalition Against Contraband Tobacco


 



 

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