Ottawa Unsure About Scope of Tobacco Smuggling: Federal Records

Contraband tobacco is displayed at a news conference where the Canada Border Services Agency announced it would begin using sniffer dogs to combat the illegal tobacco trade in Montreal on May 28, 2010. Ryan Remiorz/The Canadian Press

The federal government is unsure about the scope of tobacco smuggling in Canada, according to records tabled to the House of Commons.

“The excise reporting gap was estimated to be on average $400 million of federal excise revenue for the tax years 2014 to 2018,” said an Inquiry of Ministry document tabled in Parliament on May 31.

As first reported by Blacklock’s Reporter, the $400 million amount included tax revenue lost to contraband of all kinds. No breakdown was provided.

The figures were disclosed via an inquiry submitted by Conservative MP Philip Lawrence who asked for the amount of tobacco tax revenues lost through illegal trade.

“What is the amount of federal tax revenue that is lost annually from the sale of illegal, untaxed tobacco?” Lawrence wrote in April. “How does the government track and monitor the sale of illegal, untaxed tobacco in Canada?”

The Canada Revenue Agency reported it collected $1,820,138,619 in tobacco taxes last year though no estimates on tax revenues lost to smugglers were provided, according to Blacklock’s findings.

‘Barely Mentioned’

In a written submission to the Senate legal and constitutional affairs committee in September 2022, Imperial Tobacco Canada Ltd. estimated billions were lost to smuggling per year.

“Illegal tobacco costs around $2 billion annually in lost tax revenue, with that money diverted to some of Canada’s most notorious organized crime groups,” wrote Ralf Wittenberg, president and CEO of Imperial Tobacco Canada.

“Despite this, the Federal Government has barely mentioned illegal tobacco since 2015, let alone taken any measures to address it.”

Wittenberg said Canada’s illegal tobacco problem spilled beyond its borders with “illegal Canadian product turning up in the United States, Mexico, the Caribbean and Central America.”

“Domestically, after several years of relative stability, the illegal market is growing again,” he added, estimating the size to be about “32 percent of the market.”

Wittenberg attributed the growth to the “persistently high rates” in Ontario at 35 to 40 percent, and the “recent explosion” in B.C. where the rate grew to 35 percent, according to his company’s estimates.

“Numerous reports from law enforcement agencies, think tanks and media have drawn clear links between illegal tobacco and other criminal activities, including drug and weapons trafficking, human smuggling, money laundering and terrorist financing,” he said.

An Access to Information report obtained by Blacklock’s in 2014 showed the public safety department as saying it didn’t have a reliable estimate of cigarette smuggling.

“Illegal supply is flourishing,” said the report, titled “Comments For Public Safety Canada.”

“At the present time there is evidently some disagreement on the scale of the illegal market.”