Canadian Retailers Expect Significant Rise in Illegal Tobacco Sales

Published in CSP Daily News

Urging provincial governments to maintain current tobacco tax rates following federal hike

TORONTO -- The Ontario Convenience Stores Association (OCSA) and its 7,000 retail members in Ontario, and the Western Convenience Stores Association (WCSA) and its 6,000 members in Alberta, British Columbia, Manitoba, Saskatchewan, Yukon, Northwest Territories and Nunavutv, are urging provincial governments to maintain current tobacco tax rates following an increase in the federal excise tax on tobacco products.

"Increased taxes on tobacco products punishes law-abiding retailers, and do nothing to address the issue of contraband tobacco," said Dave Bryans, CEO of the Ontario Convenience Stores Association. "It is critical that Ontario does not add to the problem created by an excise tax hike by increasing their own tobacco taxes."

"There are serious negative and unintended consequences that come with a high tobacco tax policy," said Andrew Klukas, president of the WCSA. "A tobacco tax increase by the B.C. government would harm small business owners while incentivizing traffickers and organized crime."
He added, "Illicit tobacco is a public safety issue, plain and simple."
Contraband tobacco is sold without mandated health warnings and without age-verification checks, to anyone who is willing to buy. Increased taxes and regulations drive the tobacco market underground, meaning these products are both more affordable and accessible to youth.

"We have seen an increase in the presence of illegal tobacco at hospitals and high schools across Ontario--places where no one should be smoking, period" said Bryans. "Communities such as London, Windsor, Niagara Falls, and even parts of the GTA [Greater Toronto area] are losing ground to the illegal tobacco trade."

Ontario's c-store retailers are urging the province not to follow suit with the federal government by hiking provincial taxes on tobacco products. Instead, the OCSA is asking that the provincial government follow through on previous commitments to enhance enforcement to stop the illegal market from expanding. The association is also asking the province consult further with retailers on this public safety issue, and work with all levels of government to address Canada's illegal tobacco problem.

"We want to work with the government to address youth access to tobacco and the illegal tobacco market. Raising taxes is not the way to do this," said Bryans. "Tax increases may appear to be a short-term gain for governments, but the consequences faced by provincial law enforcement, communities and our small businesses that accompany these increases are felt for much longer."

The recent federal budget had no additional contraband enforcement measures for Western Canada, leaving the provinces to fend for themselves, Klukas said.

As recent as Feb. 7, 2014, the Manitoba Finance Special Investigation Unit, assisted by Royal Canadian Mounted Police (RCMP) officers, seized 858,800 illegal cigarettes.