Almaguin Highlands OPP seized 800 cartons of contraband cigarettes as a result of a traffic stop in Armour Township on Jan. 6. At approximately 2:10 p.m., police clocked a northbound minivan at 132 km/h on Hwy. 11, near Ferguson Road. Further investigation revealed that the vehicle’s rear seats were removed, and 16 cardboard boxes were inside, each containing 50 cartons of cigarettes. The 160,000 illicit smokes were turned over to the RCMP, and charges are pending against one adult male. With a set fine calculated per cigarette under the Excise Act, the suspect could pay a hefty price if convicted.
ALMAGUIN — Almaguin Highlands OPP recently discovered 800 cartons of illegal cigarettes after pulling a speeding car over.
It’s just one example of a trend in the tobacco market.
A recent report suggests that significant numbers of Ontario smokers are using illegal tobacco products — ones that aren’t properly taxed.
The Ontario Tobacco Research Unit’s study, titled Contraband Tobacco in Ontario, was released in November. It says much of Canada’s illegal tobacco is smuggled into the country from U.S. First Nations reserves, but some of it also comes from overseas, tax-exempt cigarettes from reserves and domestic illegal production. They’re sold on the streets, at reserves and through retail outlets.
The street price for contraband cigarettes, the report says, is less than one-third of properly-taxed products.
The study looked, in depth, at how many Ontarian smokers have purchased illegal cigarettes on reserves.
It says over one-third of Ontario smokers report ever buying tobacco products on reserves, while 12 per cent report doing it regularly.
The number’s even higher in Northern Ontario, says the report: 54 per cent of Northern Ontario smokers report ever buying illegal tobacco from reserves and 21 per cent say they regularly purchase tobacco products from reserves.
The study estimates that, based on raw data, lost revenue on untaxed tobacco products equals over $122 million a year — over $172 million in Ontario tobacco taxes, $41 million in federal excise duty and almost $9 million in GST.
“We believe there are a number of reasons attributing to lower tobacco revenues — this includes healthier lifestyle choices and the impact of the Smoke-Free Ontario Act,” said Ministry of Revenue spokesperson Scott Blodgett. “There is no question that the illegal or underground tobacco market, which is a problem in many parts of North America and Europe, has also had an impact on provincial revenues. The important point is that we continue to take steps to address the contraband market.”
During two fiscal years ending March 31, 2007, Blodgett said, more than $14 million contraband cigarettes, 112,000 untaxed cigars and significant quantities of fine-cut tobacco were seized by ministry investigators and inspectors.
The Ministry of Revenue’s retailer inspection program conducts on-site inspections of tobacco stock at retail outlets to ensure that tobacco products are Ontario tax-paid, Blodgett said. They currently conduct an average of 500 retailer inspections a month.
Staff is trained in identifying contraband and counterfeit products.
Recent Ontario budgets have strengthened enforcement against the illegal manufacture and sale of tobacco products, Blodgett said.
These measures include improved enforcement tools, such as new offence provisions, stiffer fines and prison terms for certain offenses, as well as new and improved tools for inspectors and law enforcement officials, he explained.
Contraband seizures increased five-fold between 2003-2004 and 2004-2005.
Convictions doubled between 2003-2004 and 2005-2006.
“Depending on the progress of cases through the courts, the number of convictions in 2007-2008 is expected to be more than double the number in any previous year,” Blodgett said.
When local police come across an illegal cigarette stockpile or operation, like the incident in Almaguin last week, officer don’t actually lay charges, said North East Region OPP community services officer Carolle Dionne.
They must notify the Ministry of Revenue, she said. “We only detain the vehicle and the ministry takes over from there.”
Being involved in the production and transfer of illegal tobacco can bring hefty fines.
Blodgett said that in June 2006, fines of $1 million were brought against two major underground tobacco dealers. Fines between $46,000 and $560,000 were handed down in ministry prosecutions in April and May of last year.
The male suspect in the Almaguin case, if convicted, could also dig deep in his pockets, since there’s a set fine per cigarette under the Excise Act.
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