The governments of British Columbia, Ontario and Newfoundland and Labrador lost up to $2.47 billion in tax revenues over four years due to the growth in illegal tobacco sales, says a convenience industry report.
The Convenience Industry Council of Canada report released Wednesday examined the downward trend in legal tobacco sales in the three provinces since 2019, compared with the rising growth in the underground contraband tobacco market.
It estimated B.C. lost between $215 million and $591 million in tobacco tax revenue to the illegal sales between 2019 and 2022.In Ontario, the loss for the same time period was valued between $990 million and $1.8 billion, and between $25 million and $81 million in Newfoundland, the report said, which suggested the losses could be similar for the other provinces not included in the review.
"In an effort to reduce smoking rates, federal and provincial governments have increased taxes on legal tobacco products," said the report. "The result? Many smokers have sought cheaper tobacco on the illicit market instead." "Organized crime groups exploit this demand with low-cost cigarettes manufactured on reserve, and then traffic these products to non-status individuals," said the report.The British Columbia Ministry of Finance has previously said in a statement the provincial Tobacco Tax Act includes stiff penalties for dealing in illegal tobacco.
"The major driver of the explosive growth of illegal cigarettes in Canada: the significant price difference between tax-paid legal cigarettes and contraband cigarettes," said the report. "Contraband cigarettes may be purchased for only about 40 per cent of the price of legal, tax-paid cigarettes."
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