CICC releases new study on contraband tobacco in Canada
Organized crime, trafficking in drugs, guns and tobacco, are cashing in on Canada’s growing contraband tobacco market, racking in almost $1.3billion—shuttering law-abiding retailers in the process.
A new study conducted by EY Canada, commissioned by the Convenience Industry Council of Canada (CICC) finds the illicit tobacco market is booming, and in some cases surpassing legal sales, harming Canadians, small businesses and government revenues.
Using sales data of legal tobacco products between 2019 and 2023, the new report estimates the illegal tobacco market, controlled by organized crime, is enormous – and growing. Contraband tobacco now accounts for 29% of the market in Alberta, 38 per cent in Nova Scotia, 45% in Manitoba, and an unbelievable 52% in New Brunswick.
That means that in those provinces, at least 1 in every 4 cigarettes sold, are sold in the illegal, unregulated black market. Only in Quebec, which has taken serious action to crack down on the booming illegal market, does that number sink below 20%.
The study estimates that in 2023 alone, these five provinces lost a combined total of $316 million in tax revenue.
In EY Canada’s second report released in September 2023, the market share of contraband cigarettes in the country’s “hot spots” accounted for as much as half in Ontario, 45% in British Columbia and 44% in Newfoundland and Labrador, reinforcing the pan-Canadian nature of the problem.
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“The illegal tobacco industry isn’t a victimless crime,” said Anne Kothawala, president and CEO of the Convenience Industry Council of Canada. “Contraband costs us all and is taking money out of the pockets of law-abiding Canadians.”
In a recent media report, RCMP Insp. Etienne Thauvette states, “Contraband tobacco remains a significant revenue stream for organized crime and individuals looking to profit from this illegal underground industry, undermining public health and depriving our communities of vital tax revenue that supports essential services.” Revenue from contraband tobacco “often supports organized crime activities such as drug trafficking, human trafficking and firearms smuggling.”
Addressing illegal tobacco is not just smart economics, it’s necessary for public safety. It also must be addressed to avoid rapid corner store closures; 1.5 stores are shuttering in Canada each day.
To help solve this growing crisis, CICC recommends the following:
- Increasing resources and funding to support police in their e4orts to crack down on illegal tobacco networks and put an end to the contraband epidemic;
- Increasing enforcement and penalties for those caught with illicit tobacco;
- Increasing federal – provincial coordination between law enforcement; and
- Disrupting the online illicit market, which accounts for a significant amount of illegal tobacco and nicotine products sold to young people.
The Impact of Contraband Tobacco on Legal Sales and Government Tax Revenues is the third study conducted by EY for CICC.
