McGuinty blames Ottawa for uncollected tobacco taxes

December 09, 2008

Toronto Star

Keith Leslie
THE CANADIAN PRESS

The federal government should take most of the blame for Ontario's failure to collect $500 million in tobacco taxes each year because a large part of the problem is centred on aboriginal reserves that are Ottawa's responsibility, Premier Dalton McGuinty said today.

Ontario Auditor General Jim McCarter's noted Monday in his annual report that the province misses out on hundreds of millions of dollars in lost tobacco taxes, and he blamed a lack of political will to deal with the issue.

McGuinty insisted that isn't the case.

"The biggest challenge of course has to do with activities taking place on reserves, and those are properly a federal jurisdiction," McGuinty said. "We would be pleased to work with them, but they've got to take the lead on the reserves."

The Progressive Conservatives said the province must crack down on illegal smoke shacks operating near reserves, including three near the Six Nations reserve in the Caledonia area, the site of a long-running occupation of a former housing development by aboriginal protesters.

"They're harassing some of the convenience-store operators while letting some of these illegal operations flourish," said Opposition Leader Bob Runciman.

"What kind of message does that send out to the public who are buying these illegal cigarettes? Fifty per cent of cigarettes purchased in Ontario now are illegal, and they're being encouraged by the government turning a blind eye to illegal operators and illegal sales."

NDP Leader Howard Hampton said both levels of government lack the will to tackle tobacco problems on reserves despite the huge loss in tax revenues, and he suggested Ontario needs to embarrass the federal government into taking action.

"This is a lack of political will on the part of the McGuinty government and the federal government," Hampton said.

"What Ontario needs to do is tell the feds we're interested in getting serious about this, and if they won't, I think the embarrassment needs to be thrown at the federal government."

The auditor said the Ontario government needs to work with police and border agencies to reduce or eliminate the illegal importation of cigarettes and to better monitor tobacco sales on reserves so they don't exceed allocation limits.

First Nations residents in Ontario are allowed to buy tax-free tobacco on reserves for personal use – up to 2.5 cartons a month for every adult who smokes – but the auditor found one tobacco manufacturer-wholesaler alone sold 250 per cent of the total allocation for all adult smokers on all reserves.

McCarter estimated that alone cost the government at least $100 million in lost taxes, and another $26.6 million in taxes wasn't collected on 76 million cigars sold on Ontario reserves in 2006-07.

"The limits have been exceeded by miles and the government should be stepping in to enforce it, but they're not doing it," Runciman said.

"They're backing away from confrontation."

McGuinty said Ontario has doubled convictions since last year and increased tobacco seizures by 365 per cent in the same time, and he insisted the province has made progress on the tobacco issue.

Finance Minister Dwight Duncan criticized reporters for suggesting Ontario's projected $500-million deficit this year could be wiped out if the province collected all the tobacco taxes it is owed.

"It won't be easy to recover and it is not the answer to our economic circumstances," Duncan said. "People shouldn't make light of our economic circumstances by equating that number to why there's a deficit."