SOLVING ILLICIT TOBACCCO A National Strategy There is no debate that the global trade in contraband tobacco has far-reaching implications for society. Too much evidence exists today to deny that the black market in tobacco draws in the involvement of a host of problems for public safety and national security. Complicating the picture is the inevitable Canadian debate relative to which level of government has control over what activities and in so doing responsibility for quelling the illicit tobacco industry falls between the cracks.
The reality of the debate is much more visceral when viewed through the lenses of aboriginal rights and commercial responsibilities. Competing “constituencies” in the debate continue to pursue support by staking out scientific, social and moral positions on the smuggling and selling of untaxed and unregulated tobacco products. The Ontario Convenience Store Association points fingers at the Canadian First Nations as the source of contraband tobacco off reserve. Law Enforcement warns of the role of Organized Crime – up to 175 gangs and the Italian Mafioso too! Band leaders on reserve say that it is their right to deal in tobacco all they want so long as it helps the economic prosperity of the community. Ontario farmers blame the McGuinty Liberal Government for “ripping them off” for 69 cents for the tobacco pounds they agreed not to grow pursuant to the Tobacco Transition Program of 2008. All in all, things are a mess!
The provisions of Bill C10, An Act to amend the Criminal Code (trafficking in contraband tobacco), which was sent to the Senate for “sober second thought” has passed Third Reading and awaits proclamation. The Bill will pass but it will leave a sour taste in the mouths of some of the Bill’s “constituencies”, including First Nations. During the Senate “consultation” process, several First Nations leaders decried the flawed consultation process with Canada’s First Nations.
Despite the progress against contraband tobacco with Bill C-10 from a law enforcement point of view, many of the conditions that support the illicit trade in tobacco remain. Save for high profile busts like the “Sweet Dreams” takedown last spring in Montreal that netted the Sicilian Mafia connection, the slow burn of the illicit tobacco trade has caused convenience store closures, stripped billions of dollars from federal and provincial tax coffers, made criminals out of law abiding farmers, and has opened new routes to marketing cigarettes to children on school grounds.
A National Approach
The solution to the many problems associated with contraband tobacco require more than just tinkering with federal legislation yet again. The complexities of the issue require a complete re-thinking of the problem of illicit tobacco and how best to deal with it.
A truly novel and potentially much more effective way of dealing with all tobacco regulation in Canada would be to appoint a National Tobacco Ombudsman (NTO) with sufficient investigative and search and seizure powers to greatly reduce or even eliminate the prevalence of illicit tobacco in Canada. To avoid any constitutional confusion, the NTO would be specifically national in scope but multi-jurisdictional in its powers and therefore a uniquely derived capability that can cross federal/provincial/First Nations lines to arrive at practical solutions.
Tobacco and Competing Constituencies
When it comes to a serious attempt to address the problems associated with the illicit tobacco trade in Canada, the solution needs to focus on four areas that need fixing. All four need to be dealt with rationally and objectively and potentially all by a properly selected and resourced NTO.
- Law Enforcement
To date in Canada the RCMP has been afforded the mandate and financial resources to combat contraband tobacco. Unfortunately, the Mounties have been sorely inadequate to the task. Despite RCMP press releases that take credit for illicit tobacco busts, two realities remain. First, most of the Mounties believe that stopping the flow of contraband tobacco is an insult to their mandate as Canada’s federal police force. Instead of trying to convince the RCMP that this is important work for them to pursue, it would be better to shift law enforcement to local and provincial police forces and provide them with the manpower and financial resources they need to investigate and pursue offenders.
Besides pursuing organized crime groups and chasing terrorism-related financial networks, there are many other, less sexy law enforcement activities that need to be attended to in order to fully address the contraband problem. For one example, enforcing the regulations that control the production and distribution of tobacco are provincial matters but require the monitoring and investigative expertise that comes with experienced and trained law enforcement personnel.
A NTO should be given the mandate to define the roles and resources of local and provincial police forces to support the enforcement of tobacco growing and distribution legislation and regulations at both the provincial and federal levels. Moreover, should the provisions of Bill C-10 (or something like it) come into effect, sworn peace officers from local and provincial forces will need to be coordinated in training and procedure.
- First Nations – Rights and Fairness
A First Nations Chief stated that Bill C-10 effectively allows the Canadian Government to enter the 6 Nations of the Grand River or Tyendinaga, both in Ontario, with no-knock raids, flash bangs, police dogs and RCMP in riot gear if we have in our possession unstamped tobacco products. In both the Akwesasne and Kahnawake reserves in Quebec there are no less than 50 illicit cigarette factories. First Nations here have long served notice to both legislative authorities and law enforcement that they are most unwelcome. Both of these reserves continue to produce high volumes of contraband tobacco that continue to be distributed across Canada.
- Growers – the 69 cent solution
Farmers in Southern Ontario believe fervently that they have been “screwed” by the Ontario Government. This screwing took place when Premiere McGuinty reneged on a deal, as part of the Federal Government’s Tobacco Transition Program of 2008, to pay farmers sixty-nine cents for every pound of tobacco they would not grow in future. Some of the farmers lost their farms; others found ways to circumvent the deal – take the money from the feds and continue to grow tobacco for sale to the black market.
The NTO would not permit this fiasco to develop. Fairness would have dictated a process for negotiating the buyout such that all parties would be agreeable to the outcome and all parties would respect the terms of activity or payment. To give the deal teeth, the NTO would have the resources to monitor the results of the agreement, including payments promised and behaviour modified.
- Taxation Rationalization
It is widely known that the infamous U.S. mobster, Al Capone, was convicted for tax evasion in order to put him away for life. Present day mobsters are involved in using contraband proceeds to engage in other serious criminal activities such as drug, gun and human trafficking and terrorism funding.
Studies by reputable think tanks such as the US Mackinac Institute have determined that there is a sweet spot in government taxation levels that represents the most effective price deterrent to smoking and the point where tax hikes drive consumers – especially young consumers – to buy contraband cigarettes.
A NTO would have the ability to provide much wisdom and hopefully much influence in advising governments at all levels how to set tax policy and rates within the context of knowledgeable consequences. The other important aspect that would be performed by the NTO is to ensure harmonization across jurisdictions which would eliminate “spatial arbitrage” between jurisdictional lines.
Action Required
The concept of a National Tobacco Ombudsman requires immediate discussion and very near term implementation so that tax bases can be restored with money now flowing to the criminal elements in Canada and abroad.
Ombudsmen are about protecting the rights of the public. A NTO with criminal investigative powers led by a credible Ombudsman would protect the legitimate interests of the First Nations communities, provide law enforcement with the tools to rid our communities of organized crime groups, provide guidelines for the orderly growing of tobacco on or off reserves, and stop the lust for tax grabs at the expense of public safety. This Ombudsman would be answerable to Parliament and would not be buried in the bureaucracy with hierarchical structures that have been established to protect and avoid issues of significant importance. Contraband tobacco in Canada continues to be a multi-billion dollar rip off that fuels organized crime and is a significant threat to national security as the illicit trade moves with fluidity across national and international borders.
The establishment of the NTO requires unwavering leadership, transparency and accountability at all levels of government, within commercial activity involving tobacco, and within First Nations’ communities. For the Silo, Edward R. Myers
Supplemental– Tobacco.org home to tobacco news and information
The Ontario government has allowed the illegal tobacco industry to flourish.
It is believed contraband tobacco activity in Ontario sits somewhere around 33 per cent and in some areas the numbers are estimated to be closer to 50 per cent. Many argue the illegal industry in Ontario is the worst of any advanced economy in the Western world.
When we look at other provinces, the numbers are not nearly as dramatic – British Columbia’s contraband rate sits around 17 per cent while Manitoba comes in at 14.7 per cent and Saskatchewan only 10.8 per cent.
Each year, like clockwork, government brings forward legislation – typically a budget bill – that either ostensibly encourages healthier smoking habits or proposes new measures to combat illegal smokes. Most often these measures mean higher taxes on legal products, which exacerbate the problem. I have long called for – even through a Private Members Bill – the reduction of tobacco taxes in order to eliminate the competitive advantage of the illegal market.
Government efforts to date have not worked. Since 2008 the overall rate of smoking in Ontario remains at 18 per cent, or one in five. This means 2.1 million Ontarians light up despite all the legislation and regulation.
Ontario also boasts the highest level of young smokers in Canada. High school students in Haldimand-Norfolk can walk to the parking lot and buy cheap smokes out of the trunk of a car without having to show ID. Accessibility is at the root of this stubbornly high consumption.
My colleague Tim Hudak recently asked the Wynne government why it won’t recognize illegal tobacco dealers for what they are – drug dealers — correctly accusing, “…they’re taking advantage of our youth and getting them hooked on a deadly product.”
Perhaps government feels the same as those who believe contraband tobacco is harmless. The truth remains, illegal activity opens trade for not only tobacco but also drugs, firearms, and human smuggling. These activities are being run by some of the most notorious gangs in North America.
One of the biggest problems I have is that governments pick the low-hanging fruit. Instead of getting to the root – those who manufacture, smuggle and deal – government focusses on tobacco growers, and smokers who buy at the shacks.
As a result, the illegal cigarette dealers, those who smuggle, those who manufacture, have little to worry about. It’s low-risk and lucrative for organized crime. Recently, the Wynne government banned menthol cigarettes – it’s just a matter of time before that product goes underground. Before we make more changes on the legal side, shut down the illegal.
In Quebec there’s been a dramatic improvement since police were given greater authority to investigate, seize and restrict cigarette-manufacturing equipment and vehicles. Further, they are provided the financial resources and incentive. In fact, Quebec municipal police detachments are allowed to keep any proceeds of crime that come from any tobacco convictions, instead of handing the money over to the federal government.
The current government needs to go bigger and bolder on illegal smokes and treat it like the drug that it is — not just as a nuisance. Bargain with First Nations — provide incentive and reward. Give police greater authority. Lock up the criminals and bulldoze the cigarette equivalent of meth labs. Normally, if something isn’t working, try something different. Haldimand-Norfolk MPP Toby Barrett
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MPP Brady asks pointed questions regarding contraband tobacco
Queen’s Park: Haldimand-Norfolk MPP Bobbi Ann Brady today asked some tough questions about contraband tobacco. Brady rose in the House and, in lieu of Finance Minister Peter Bethlenfalvy, directed her questions to Stephen Crawford, Parliamentary Assistant (P.A) to the Minister of Finance.
“Speaker, Quebec’s model of dealing with contraband is extraordinary and Ontario signaled that model would be adopted in the 2019 budget but the policy was pulled days before print,” said Brady. “Speaker, to the minister, who or what was the reason the policy was pulled in 2019 and why is it missing again in the 2023 budget?”
Brady reiterated to the House that illicit tobacco threatens the safety of communities as profits fuel organized crime involved in drugs, guns, and human trafficking. Further, legitimate businesses suffer, and the government loses out on $750 million in taxes annually.
She went on to explain that in 2014, the federal government amended the criminal code of Canada – Bill C10 – to create a new offence of trafficking in contraband tobacco and to provide for minimum penalties of imprisonment for repeat offenders. Brady then asked the minister to explain why as soon as this government came to power, it changed the wording from “contraband” to “unregulated,” which makes it difficult for police and prosecutors to apply the law under such an ambiguous definition.
“Can the minister explain why each budget under this government contains the word unregulated as opposed to contraband, illicit or illegal?” asked Brady.
The P.A. simply responded to a finance question with a justice answer while trying to assert that the government takes illicit tobacco seriously. He then attempted to tie the government’s recent bail reform initiatives to the issue.
“The two questions I asked remain unanswered,” Brady said following Question Period. “This government is knowingly turning a blind eye to this trade and has changed terminology to empower criminals.”
For more information, contact MPP Bobbi Ann Brady at babrady-co@ola.org or 519-428-0446 Please mention The Silo when contacting.
UPDATE- SIMCOE – Haldimand-Norfolk MPP Toby Barrett has proposed legislation to address trafficking and the black market trade.
Barrett’s Bill 162 – Commission of Inquiry into Illegal Trade and Trafficking of People, Drugs, Money, Tobacco and Weapons Act, 2016 – was introduced in the Legislature on Feb. 17. The bill calls for a time-limited commission to be struck to examine the ongoing problems and suggest solutions.
Barrett has seen the effects of illicit tobacco on the tobacco-growing economy within his riding, and has long advocated for action. The extent of the program was driven home when he had four separate media outlets from Mexico and Central America visit his Simcoe office in regards to local contraband appearing in their countries.
According to freelance journalist Ed Myers, “All smuggling-related crimes are interconnected — organized crime networks that are used to smuggle contraband tobacco are the same as the ones with the same criminals who are running drugs, weapons or humans to fuel more serious crimes or fund terrorist attacks.”
“Crime groups pervade all parts of our society and our daily life, and are a threat to peace, order and good government,” Barrett said. “Information and intelligence sharing among all of us, including law enforcement agencies and those responsible for public safety, must be enhanced – hence my call for an inquiry.”
Barrett’s bill will be debated in the Legislative Assembly the afternoon of March 24. Bobbi Ann Dwornikiewic
For more information, contact MPP Toby Barrett at 519-428-0446 or by e-mail at at toby.barrett@pc.ola.org Please mention The Silo when contacting.
Ontario Creating New Enforcement Team to Combat Contraband Tobacco
Province Strengthening Enforcement and Collaboration
NEWS January 25, 2016
Ontario is taking action to combat contraband tobacco and keep our communities safe by creating a new Contraband Tobacco Enforcement Team within the Ontario Provincial Police (OPP).
Located within the OPP’s Organized Crime Enforcement Bureau, the new team will be dedicated to investigating the smuggling and trafficking of contraband tobacco and will work closely with local, provincial, national and international enforcement agencies to combat and eliminate sophisticated contraband tobacco networks across Ontario.
The team will also work with the Ministry of Finance’s tobacco tax enforcement staff by sharing information and collaborating on contraband tobacco enforcement investigations. The Ministry of Finance will continue to provide tobacco enforcement through audits, inspections, and investigations.
Tobacco consumers should be aware that:
◾All legal cigarettes sold in cartons or packages have a legal yellow ‘ON Duty Paid Canada’ Ontario tobacco stamp, with only certain limited exceptions.
◾It is illegal to buy, possess or distribute untaxed cigarettes without proper authorization.
◾Punishment includes civil penalties, fines, and in some cases, jail time, depending on the quantity of contraband tobacco and conviction history.
Addressing contraband tobacco continues to be a priority for Ontario. Low-cost, contraband tobacco undermines provincial health objectives under the Smoke-Free Ontario Strategy, results in less tobacco tax revenues for critical public services our communities and families rely on, and compromises public safety through links with organized crime.
QUOTES
“Combating and eliminating contraband tobacco is a priority for our government and what the new Contraband Tobacco Enforcement Team is all about. By strengthening the enforcement partnership between the OPP and the Ministry of Finance, we are taking a major step forward in breaking the link between organized crime and contraband tobacco and making our communities safer.”
— Yasir Naqvi, Minister of Community Safety and Correctional Services
“The OPP’s dedicated Contraband Tobacco Enforcement Team will conduct thorough and professional investigations to disrupt contraband tobacco distribution and the enormous revenues which fuel further criminal activities.”
— J.V.N. (Vince) Hawkes, Commissioner, Ontario Provincial Police
“As a significant component of the underground economy, illegal contraband tobacco reduces tax revenue which supports critical services that all of us rely and depend on like health care, education and transit. This new Enforcement Team will combat contraband and help protect public safety and health programs. We value the Ontario Provincial Police’s enforcement efforts to combat the sale and use of contraband tobacco on behalf of all Ontarians.”
— Charles Sousa, Minister of Finance
QUICK FACTS
§ On June 1, 2011, the Supporting Smoke-Free Ontario by Reducing Contraband Tobacco Act, 2011 http://www.mhp.gov.on.ca/en/smoke-free/ became law.
§ This new enforcement team fulfills a commitment from the 2015 Budget.
§ Since 2008 more than 252 million contraband cigarettes, 4.1 million untaxed cigars, and 169 million grams of untaxed fine-cut or other tobacco products have been seized by the Ministry of Finance.
§ The RCMP estimates that 175 criminal organizations are involved in contraband tobacco in Canada, and it is believed that many use it to finance more serious illegal activity, like drug and weapon trafficking.
§ Being caught in possession of a single pack of 20 contraband cigarettes will cost the purchaser $108.The fine for 50 cartons or baggies is $4,693 and possession of any more could send you to jail.
§ Anyone can anonymously report cigarettes being sold illegally, to Ontario Crime Stoppers at 1-800-222-8477, or online at TipSoft. https://www.tipsubmit.com/start.htm
LEARN MORE
Read about Tobacco Tax http://www.fin.gov.on.ca/en/tax/tt/index.html
Read about contraband tobacco http://www.fin.gov.on.ca/en/tax/tt/illegal.html
The Ontario government has allowed the illegal tobacco industry to flourish.
It is believed contraband tobacco activity in Ontario sits somewhere around 33 per cent and in some areas the numbers are estimated to be closer to 50 per cent. Many argue the illegal industry in Ontario is the worst of any advanced economy in the Western world.
When we look at other provinces, the numbers are not nearly as dramatic – British Columbia’s contraband rate sits around 17 per cent while Manitoba comes in at 14.7 per cent and Saskatchewan only 10.8 per cent.
Each year, like clockwork, government brings forward legislation – typically a budget bill – that either ostensibly encourages healthier smoking habits or proposes new measures to combat illegal smokes. Most often these measures mean higher taxes on legal products, which exacerbate the problem. I have long called for – even through a Private Members Bill – the reduction of tobacco taxes in order to eliminate the competitive advantage of the illegal market.
Government efforts to date have not worked. Since 2008 the overall rate of smoking in Ontario remains at 18 per cent, or one in five. This means 2.1 million Ontarians light up despite all the legislation and regulation.
Ontario also boasts the highest level of young smokers in Canada. High school students in Haldimand-Norfolk can walk to the parking lot and buy cheap smokes out of the trunk of a car without having to show ID. Accessibility is at the root of this stubbornly high consumption.
My colleague Tim Hudak recently asked the Wynne government why it won’t recognize illegal tobacco dealers for what they are – drug dealers — correctly accusing, “…they’re taking advantage of our youth and getting them hooked on a deadly product.”
Perhaps government feels the same as those who believe contraband tobacco is harmless. The truth remains, illegal activity opens trade for not only tobacco but also drugs, firearms, and human smuggling. These activities are being run by some of the most notorious gangs in North America.
One of the biggest problems I have is that governments pick the low-hanging fruit. Instead of getting to the root – those who manufacture, smuggle and deal – government focusses on tobacco growers, and smokers who buy at the shacks.
As a result, the illegal cigarette dealers, those who smuggle, those who manufacture, have little to worry about. It’s low-risk and lucrative for organized crime. Recently, the Wynne government banned menthol cigarettes – it’s just a matter of time before that product goes underground. Before we make more changes on the legal side, shut down the illegal.
In Quebec there’s been a dramatic improvement since police were given greater authority to investigate, seize and restrict cigarette-manufacturing equipment and vehicles. Further, they are provided the financial resources and incentive. In fact, Quebec municipal police detachments are allowed to keep any proceeds of crime that come from any tobacco convictions, instead of handing the money over to the federal government.
The current government needs to go bigger and bolder on illegal smokes and treat it like the drug that it is — not just as a nuisance. Bargain with First Nations — provide incentive and reward. Give police greater authority. Lock up the criminals and bulldoze the cigarette equivalent of meth labs. Normally, if something isn’t working, try something different. Haldimand-Norfolk MPP Toby Barrett