PRESS RELEASE - Jan. 15, 2009

OTTAWA - Health groups have identified a source for more than a billion dollars in annual federal revenue and have developed a plan for the government to recoup the money. The source is unpaid tobacco taxes and the plan is to get the contraband tobacco market under control. The Canadian Coalition for Action on Tobacco, which includes many of Canada's largest health charities and health professions, has presented this plan to the government.

"In this time of economic recession, a time when governments are desperate for revenue, it is critical that the government recover over a billion dollars in unpaid tobacco taxes," said Garfield Mahood, Executive Director of the Non-Smokers' Rights Association. Contraband cigarettes sell for as little as $6 per "baggie" of 200, compared to the average retail price of $50-$70 for a carton (with all federal and provincial taxes paid) in Ontario and Quebec, the provinces with the lowest tobacco taxes in all of Canada.

The federal government is losing an estimated one billion dollars per year in unpaid tobacco taxes. Moreover, the Ontario Auditor General reported in December 2008 that Ontario is losing an additional $500 million annually. When you consider the fact that the federal, Ontario and Quebec governments have stopped increasing tobacco taxes out of concern for the contraband market, the actual losses are much greater.

High cigarette prices, achieved largely through federal and provincial tax increases, are widely recognized by researchers and government officials as the single most important means of reducing smoking. "Because of the widespread availability of cheap contraband tobacco, progress in reducing tobacco use in Canada has halted and smoking rates have flatlined at 19% for 2005, 2006 and 2007 according to the Canadian Tobacco Use Monitoring Survey," stated Rob Cunningham, Senior Policy Analyst with the Canadian Cancer Society.

"The primary beneficiaries of contraband tobacco are the illegal manufacturers and the criminal networks they supply," insisted Cunningham. "While many Canadians may not appreciate the gravity of the illegal tobacco market, in fact, all Canadians end up paying-in lost federal and provincial government revenues, revenues that could be used to fund valuable government programs; and in more young people starting to smoke and fewer smokers quitting, which translate into much higher health care costs in the short-, medium- and long-term."

The RCMP has identified the major source of contraband cigarettes as the St. Regis (American) side of the Akwesasne Reserve. The other key sources are from illegal manufacturing operations on Kahnawake (near Montreal, Quebec), Tyendinaga (near Belleville, Ontario) and Six Nations (near Brantford, Ontario). "Contrary to popular belief, getting contraband under control does not require enforcement on-reserve," emphasized Louis Gauvin, Spokesperson for the Quebec Coalition for Tobacco Control. "What it does require, however, is political will."

Health groups are calling on Prime Minister Harper to control the contraband trade and safeguard Canada's hard-won progress in reducing tobacco use.

Health groups are urging the government to put in place a comprehensive plan to address the contraband tobacco problem which includes the following key measures:

1. Ensure that the federal government persuades the U.S. government to shut down the illegal, unlicensed factories located on the U.S. side of Akwesasne.

2. Prohibit the supply of raw materials (including raw leaf tobacco, cigarette packaging, cigarette filters, and cigarette paper) to anyone without a valid tobacco manufacturer's licence.

3. Establish a minimum bond of at least $5 million to obtain a federal tobacco manufacturer's licence.

4. Revoke licences of manufacturers acting illegally, including for violation of provincial laws.

5. Establish a full tracking and tracing system to monitor product shipments and identify points of diversion into the illegal market.

6. Promote with First Nations the benefits of implementing a First Nations tobacco tax equal to the provincial tobacco tax.

7. Increase penalties substantially, to serve as a more effective deterrent to participation in the contraband tobacco trade.

For further information: Francois Damphousse, Non-Smokers' Rights Association, (514) 237-7626; Rob Cunningham, Canadian Cancer Society, (613) 565-2522 ext 305

Click here to read the related Brief for The Honourable Jim Flaherty, P.C., M.P., Minister of Finance Regarding Budget 2009 from the Canadian Coalition for Action on Tobacco.