Sales of contraband cigarettes reduce BC government revenue

According to an industry study, high cigarette prices in British Columbia are causing residents to increasingly buy contraband tobacco products on the black market.

These sales fund organized crime, putting society at risk, said Eric Gagnon, vice president of regulatory affairs for Imperial Tobacco Canada. VBI.

They have also reduced government revenue.

The BC government expected $760 million in tax revenue from tobacco sales in the 2022-23 fiscal year. He then reduced that expectation by $45 million, to $715 million. in its first quarterly report of the fiscal year.

“Based on current statistics on leakage to the illegal market, there is an annual tax loss of approximately $275 million to the BC government in 2022, and an estimated $126 million loss in revenue. taxes for the federal government in 2022,” said Gagnon. .

He would like the government of British Columbia to stop increasing tobacco taxes and create a dedicated task force to investigate the phenomenon.

Gagnon is also urging the province to pass a law similar to Quebec’s, which allows police to search vehicles suspected of carrying contraband tobacco even if the illegal products are not visible.

British Columbia has the highest cigarette prices in the country, at $178 a carton, Gagnon said. This exceeds $162 per cartridge in Atlantic Canada, $162 in Manitoba and $160 in Saskatchewan.

Gagnon said some illegal cigarettes can sell for as little as $45 a carton.

“Over the past four years, the BC government has increased tobacco taxes by 44%,” he said.

This includes a price hike on July 1, when the province began requiring tobacco retailers to charge provincial sales tax on such sales.

“Nobody wants to reduce excise taxes on tobacco,” Gagnon said. “We know that. So we’re not even advocating that. But what we do know is that if you have a dedicated task force to address the issue, and if you invest in it, working with the forces of order, you can reduce the impact of illicit trade in your province.

The British Columbia Ministry of Finance sent VBI a statement to underscore that he takes the issue of contraband tobacco sales seriously.

He said he has a dedicated criminal investigation unit that works closely with all municipal police forces, the Royal Canadian Mounted Police, the Canada Revenue Agency, the Canada Border Services Agency Canada and other law enforcement agencies.

In the 2021-22 fiscal year, this unit seized 3.6 million grams of illegal tobacco, the finance ministry said, adding that between April 1 and June 30, the unit seized 2, 7 million additional grams of illegal tobacco.

“The work includes a designated retail tobacco inspection program that helps prevent the sale of contraband products at retail outlets,” the ministry said. “We also participate in the Federal and Provincial Tobacco Stamping Program which provides enhanced security features and markings. This makes counterfeit tobacco products harder to produce and easier to identify.”

First Nations people living on reserve are exempt from tobacco tax. Products intended for sale tax-free to First Nations people must bear a peach-colored stamp from the federal government.

Tobacco intended for general sale in British Columbia must bear a green provincial stamp indicating that the product has been duty-paid.

Gagnon said he believes much of the smuggled product is made on First Nations reserves in Ontario and Quebec and then trucked into British Columbia.

A government of British Columbia website warns that buying and selling illegal tobacco is a crime that carries fines of up to three times the tobacco tax, up to $50,000, two years imprisonment and forfeiture of tobacco products and any license to sell tobacco products the seller may have.

Gagnon said his statistics show sales of legal cigarettes in British Columbia are down about 20% in the first nine months of 2022, compared to the same period last year.

He estimated that cigarette sales normally decline by around 6% a year and that a 20% drop is “far too many” to be due to people quitting smoking or reducing their purchases.

Instead, he said industry statistics and research from Abacus Data estimate illegal tobacco sales in British Columbia to be between 30 and 35 percent of overall sales.

Indeed, there are many listings of tobacco products on sites such as Craigslist, with many sellers claiming that the products come from duty-free stores.

Last month, BC Crime Stoppers launched a province-wide awareness campaign to warn residents of the consequences of buying contraband tobacco.

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