Canadians losing billions to organized criminals selling contraband tobacco: Report
Convenience Industry Council of Canada (CICC) is sharing the results of a new study confirming what many in the channel observe firsthand: The contraband tobacco market in Canada is a growing pan-Canadian problem fuelled by organized crime, which is cheating governments and Canadians out of billions of dollars.
Conducted by EY Canada, CICC’s Impact of Contraband Tobacco on Legal Sales and Government Tax Revenues is a follow- to its report, “The Impact of COVID-19 on contraband tobacco and provincial tax revenues in Canada” that was published in 2020.
READ: Legal tobacco sales spiked during COVID-19 restrictions: Study
The new comprehensive 80-page report focuses on legal tobacco sales in three provinces: British Columbia, Ontario and Newfoundland and Labrador. The study estimates the size of the contraband tobacco market is as high as 69% in Ontario, 45% in British Columbia, and 44% in Newfoundland.
Broken down, this translates to tax revenue losses of up to $1.8 billion in Ontario, $591 million in B.C., and $81 million in Newfoundland over the last three years.
“Governments have turned a blind eye to this illegal market,” says CICC president and CEO Anne Kothawala. “Efforts to curb smoking are actively undermined by a thriving contraband market, all while taxpayers are being short-changed, and legal retailers are competing with organized crime.”
In a press release, the CICC notes: “The uptick in illegal sales, which law enforcement agencies, including the RCMP, have previously noted are controlled by organized crime groups, directly corresponds with a sharp decline in the sale of legal products. Legal tobacco sales are down 33% in BC, 20% in Ontario and a staggering 49% in Newfoundland.”
Fred O’Riordan, EY Canada’s tax policy leader and the lead author of this report, says: “Gauging the exact size of the contraband market is difficult, but the evidence in this report clearly shows it is growing and now easily represents at least one-third of the total market in these three provinces, and possibly much more.”
READ: 2023 Tobacco & Vaping Report: The real story behind the numbers
C-gas retailers across Canada are, once again, calling on governments at the federal and provincial level to act on the sale of illegal tobacco.
READ: Alberta Retailers Coalition calls on Minister to address contraband tobacco
CICC has long advocated on behalf of the channel.
READ: Conquering contraband in Canada
Now, in light of the findings of the new EY Canada study, the group and its members are outlining several recommendations that include:
- Increasing resources and allowing local police to keep fines and disposal of assets seized as proceeds of crime;
- Increasing police enforcement and Criminal Code penalties;
- Increasing public awareness of contraband tobacco;
- Regular, public reporting of contraband tobacco seizures; and,
- Increasing federal-provincial coordination.
Download the full report below.