Black market sales on the rise

SALES: Hurting industry, government

By Jeff Helsdon STAFF WRITER
Tilsonburg News
Wednesday August 15, 2007

A recent study confirmed illegal cigarette sales are on the rise.
The Canadian Tobacco Manufacturers’ Council recently released a study showing 22 per cent of all cigarettes smoked in Canada are contraband. For Ontario, that figure jumps to 31.6 per cent and a local MPP maintains it could be as high as 70 per cent in parts of Norfolk County.

"It confirms what we’ve been told anecdotally for some time," said Ontario Flue-Cured Tobacco Growers’ Marketing Board chairman Fred Neukamm. He added the study is another piece of evidence supporting the need for a buyout package for Ontario tobacco farmers.

Illegal sales cost the industry $123 million a year. Federal and provincial coffers are hit even harder with a loss of $1.6 billion a year in lost taxes.

In a call phone interview, Haldimand-Norfolk-Brant MPP Toby Barrett commented on the fact he had just driven by five tobacco fields. Although that wouldn’t be unusual at one time for the provincial politician who represents the tobacco belt, it is in this instance. These are new fields within Six Nations.

Barrett is aware the new tobacco crop is being grown without quota and said this is taking a bite out of demand for what was once the main crop in his riding. Tobacco farmers are also losers when people purchase contraband cigarettes, as the tobacco isn’t produced domestically - unless it’s from the new fields, Barrett commented.

While the study pegged contraband tobacco use in Ontario at 31 per cent, Barrett said he’s talked to store owners in rural areas of Norfolk south of Tillsonburg who say about 70 per cent of the tobacco consumed is black market.
"That would be true for a lot of areas," Barrett surmised.

He said the equivalent of a carton of cigarettes can be purchased in a plastic bag for $8 to $10. The comparable price for cigarettes in a local store is around $80.

"Our legal tobacco trade, whether it be farming, retail or manufacturing is at a competitive disadvantage," Barrett said. "We can’t compete with the illegal trade, especially with such a high-taxed commodity."

He sees three possible solutions for the problem.

"Often times to enforce the law when people are flouting it you have to bring in the OPP or RCMP," he said. Barrett added that having the law deal with those involved in the industry in Native territory could result in violence.

Another possible solution is to crack down on people leaving Native communities with illegal cigarettes. Barrett pointed out purchasing goods from Natives and not paying tax is illegal.

"Government at present is turning a blind eye to that, but that doesn’t make it legal," he said.

A third option is to cut the taxes. In the early 1990s, the provincial governments in Ontario and Quebec, along with the federal government, cut tobacco taxes to deal with contraband tobacco.

"And overnight 300 smoke shops disappeared on Six Nations and I saw it first hand," he said. "Their competitive advantage disappeared."

Given that the rate of contraband cigarettes purchased in Ontario is 32 per cent, Barrett called Premier Dalton McGuinty’s ‘war on tobacco’ a joke. The MPP said it was well intentioned but just didn’t work.

Barrett’s main priority though is securing a buyout package for Ontario’s remaining tobacco farmers.

While some believe the tobacco board should do something about tobacco being grown on Six Nations without quota, that isn’t within its power.

"As far as we’ve been able to tell so far, our jurisdiction doesn’t extend to the reserve," Neukamm said. "It’s clearly in government’s hands."

There are rumours of tobacco being grown outside of Six Nations by Natives, but Neukamm said the board has not located any such fields.

"If we are made aware of it and find it is being produced without a licence there are things we can do," he said.