More than just cheap cigarettes: Ontario’s black market in contraband tobacco

More than just cheap cigarettes: Ontario’s black market in contraband tobacco

More than cheap cigarettes: A four-part series that looks inside the world of illegal tobacco

gun-top Smoking gun: Profits from illegal cigarettes are being used by gangs to fund weapons, drugs and other criminal activity on our streets.
Photo Credit: Getty Images
 

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Whether it’s a van parked in a neighbourhood street, a locker in a high school or the home of a mom down the block who knows someone who knows someone, the point of sale reveals little about the extent of the contraband tobacco trade in Ontario and the GTA, and the impact it has on the people of this province.

A surprising number of Ontarians have turned to the black market in search of tobacco. By some estimates, one in three cigarettes in the province is illegally sourced—no-name sticks sold in plastic bags, knock-offs in cartons or products intended for the U.S. market or First Nation reserves—selling for as little as $8 for 200 cigarettes. A 2014 study by the Ontario Convenience Store Association (OCSA), in which researchers collected and analyzed butts from 130 sites across the province, including hospitals, high schools, office buildings and other public locations, found that about 25 percent of the cigarettes being smoked were illegal (licensed tobacco manufacturers use identifiable paper), with rates in some Northern Ontario cities higher than 45 percent. Other surveys suggest an even higher incidence rate.

While some of the province’s 2.2 million smokers may be familiar with these products and their availability, the socio-economic and criminal sides of this underground industry have darker implications, affecting jobs, government coffers, attitudes toward the law and the influence organized crime has on the life of ordinary Ontarians.

bags-of-smokes-1200 It is estimated one in three cigarettes consumed in Ontario is illegal. Photo Credit: Toronto Star File Photos
 

“Non-smokers really don’t care about the problem because they don’t know about it,” says Dave Bryans, chief executive of the OCSA. “The sources are coming from many directions and the government doesn’t know what to do about it.” While convenience stores, which employ more than 77,000 people, wrangle with lost revenue, the Ontario government is also losing out on taxes, estimated to be between $700 million and $1.1 billion annually.

The contraband market reached critical mass in the 1990s, when otherwise legal cigarettes destined for other markets were smuggled without duties and taxes back into Canada across the border or through First Nation reserves. Since then, an alternative domestic manufacturing industry has blossomed. These unregulated production facilities vary in size and quality and are often located on First Nation reserves; in some cases, cigarettes manufactured for First Nations communities under treaties are rechannelled onto the black market, says Gary Grant, spokesman for the National Coalition Against Contraband Tobacco (NCACT). Criminal gangs—more than 170 of them, according to the RCMP—are involved in cigarette distribution across the province.

“Organized crime treats it like a cash cow because it’s been reasonably low risk and high profit. A large percentage of these gangs are involved in the weapons trade, the drug trade and even human smuggling,” says Grant.

Christian Leuprecht, a professor of political science at the Royal Military College of Canada and senior fellow at the Macdonald Laurier Institute, has published extensively about contraband tobacco. He estimates that gangs get about 60 percent of the profits, which undermines the theory that First Nations communities are the main beneficiaries. “These aren’t mom and pop operations,” says Leuprecht. “Contraband cigarettes are just one of many flows for these organizations. The market is huge, much bigger than the market for drugs.”

Governments have acknowledged the problem—to a point. This past spring, the federal government’s Tackling Contraband Tobacco Act came into effect, instituting mandatory minimum penalties of imprisonment for repeat offenders trafficking a high volume of tobacco product: 10,000 cigarettes or 10 kilograms of other tobacco products. This year, Ontario itself took over the supervision of raw-leaf tobacco production in the province from the industry’s marketing board to better prevent tobacco leaves from being diverted into illegal production.

But Ontario has fallen short compared with other jurisdictions. In 2009, Quebec amended its Tobacco Tax Act, granting local police full authority to conduct investigations, rather than turning them over to the RCMP and Revenue Canada, and allowing them to seize the proceeds of crime. “The entire enforcement effort has paid for itself,” says Leuprecht. Quebec has reduced contraband’s share of the market to about 13 or 14 percent, says Leuprecht, through a coordinated effort among dozens of law enforcement agencies.
This is a sponsored post, which means it was paid for by our advertising partners. Learn more about the National Coalition Against Contraband Tobacco at stopcontrabandtobacco.ca.


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