Tags: smuggling | cigarettes | canada | smoke

Cigarette Smuggling on Rise in Canada

Friday, 04 December 2009 09:55 AM

TORONTO - The black market in cigarettes is believed to be a $1.5 billion industry in Canada.
The Ontario government estimates that half of all cigarettes sold in the province are illegal. In neighboring Quebec, that number is 40 percent. Contraband smokes cost the federal and provincial governments more than $2 billion in lost taxes.

In the 1990s, tobacco companies were accused of aiding and abetting the smuggling. In 2008, Imperial Tobacco Canada Ltd. and Rothmans, Benson & Hedges pleaded guilty to helping people sell or possess illegal cigarettes during the previous decade. They paid a total of $1.15 billion to the federal government and 10 provincial governments in fines and settlements.

Smuggling slowed down in the late 1990s after the Quebec and Ontario governments cut taxes, thereby significantly reducing the price of store-bought packs. But in the last six years, the illegal trade has come back with a vengeance.

This time around, tobacco companies have their hands clean. The source of the smuggling, say Canadian police officials, are Indian-owned cigarette manufacturers on reserves in Ontario and Quebec. But the most important source, they add, is the Mohawk community of St. Regis on the New York state side of Akwesasne.

Police say organized crime groups — from the mob to biker gangs like the Hells Angels — are also involved in the trade. Guns and drugs are smuggled along with cigarettes.

In 2008, 1,079,529 cartons of illegal cigarettes were seized by the national police — their biggest take ever. That was a 73 percent increase from 2007.

On the streets of Montreal a pack of illegal smokes can cost as little as $1, compared to $9 for legal ones at convenience stores. A sharp drop in legal cigarette sales is partly responsible for one convenience store a day going out of business in Quebec.

Cigarette companies are also worried about lost revenues. But that hasn’t cut them much slack with provincial governments.

In September, Ontario’s government filed a $50 billion lawsuit against tobacco companies to recover the costs of treating residents with smoking-related illnesses since 1955. Quebec is poised to launch a $30 billion lawsuit for the same reasons. The Ontario suit names 14 cigarette companies and their multinational parents, including Philip Morris USA, Altria Group and JTI-Macdonald Corp.

Ontario’s Attorney General, Chris Bentley, said the province spends $1.6 billion a year treating people with illnesses related to smoking, such as cancer and heart disease. There are about 13,000 smoking related deaths every year in Ontario.

Cigarette companies have denounced the lawsuits as the hypocritical actions of governments happy to collect taxes from cigarette sales while also operating casinos and selling alcohol, which create their own addictive behaviors.

About 18 percent of Canadians today are smokers, compared to 25 percent in 1999. But anti-smoking groups say the proliferation of cheap, illegal cigarettes is slowing the decline.

Last May, the Canadian and U.S. governments signed an agreement for joint coast guard patrols on shared waterways to increase border security and crack down on smuggling. They’re up against a lucrative trade where, for now at least, the money comes easy.

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TORONTO - The black market in cigarettes is believed to be a $1.5 billion industry in Canada.
Friday, 04 December 2009 09:55 AM
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