Friday, May 19, 2017

1 in 3 Cigarettes Sold in Ontario are Contraband

Cigarette manufacturing machine
Contraband was highest in northern Ontario, where illegal cigarettes now represent 64% of all cigarettes purchased, the highest rate ever. In southern Ontario, 35% of cigarettes were illegal while the figure was lower, at 28% in eastern Ontario. The contraband tobacco trade is fueled by illegal cigarette factories, based mostly in Ontario and Quebec.
Ontario had the worst contraband tobacco problem in Canada, about 1 in 3 of all cigarettes purchased in the province illegal. Contraband was highest in Northern and Ottawa/Eastern Ontario, where illegal cigarettes represented 51% and 36% of all cigarettes purchased. About 1 in 4 cigarettes in the GTA and 29% in Southern Ontario were illegal.

While non-smokers don't care, perhaps they should. The Ontario government is losing out on $700 million to $1.1 billion annually in taxes. Criminal gangs are involved in cigarette distribution across the province. Organized crime treats cigarette smuggling like a cash cow because it’s been low risk and high profit.
Illegal cigarette factories are located on First Nation reserves; cigarettes manufactured for First Nations communities under treaties are then diverted to the black market.
The gangs get about 60 percent of the profits, which undermines the theory that First Nations communities are the main beneficiaries. The market is huge, much bigger than the market for drugs. The Ontario government has been slow to react to the problem. Quebec amended its Tobacco Tax Act, granting local police full authority to conduct investigations and allowing them to seize the proceeds of crime.

Smoke shacks line Route 132 in Kahnawake, a Mohawk Territory, west of Montreal.
Under section 87 of Canada’s Indian Act, the personal property of a registered or status First Nations individual living on a reserve is exempt from taxation. Ontario’s Tobacco Tax Act includes a First Nations cigarette allocation system which permits First Nations individuals to buy allocation cigarettes on a reserve, for their exclusive use. Those cigarettes are exempt from Ontario tobacco tax. Who can, and cannot, purchase cigarettes from First Nations retailers is spelled out clearly in the act.
With a carton of cigarettes at a corner or grocery store in the $95 range, and a carton of off-brand smokes running $33 to $39 on the reserves, it’s easy to see why First Nations retailers are so popular. At least 95 per cent -- perhaps 99 per cent -- of smoke shack customers are not of First Nations heritage.

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