Adam Smith, the father of modern economics, once noted that people of the same trade seldom meet but the conversation turns to how to raise prices. And so it proved this week at a public safety committee hearing into contraband tobacco, where the chief executives of Imperial Tobacco and Grand River Enterprises, a cigarette manufacturer based on the Six Nations reserve in Ontario, told MPs how their market share is being eroded by illegal tobacco -- and urged Honourable Members to implement policies that would hike the price of contraband.
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Benjamin Kemball of Imperial said legal cigarettes sell for $65-$85 per carton of 200, which includes $17 of federal excise tax and $20-$42 of provincial or territorial tobacco tax. Jerry Montour of Grand River said his company sells a carton for $28-$35, even though his product is exempt from provincial tax.
By comparison, illegal cigarettes, most often manufactured on native reserves without any payment of excise tax and then sold in on-reserve smoke shacks or distributed by criminal networks in Canadian cities, sell for as low as $6 for a bag of 200, or 3ยข a cigarette.
Both Mr. Kemball and Mr. Montour want stricter enforcement, new taxes or both. "Children now have access to cigarettes at pocket money prices," said Mr. Kemball.
He cited an analysis of cigarette butts outside school yards in Ontario and Quebec which suggested the penetration of illegal cigarettes amongst children is running at 30%, and up to 70% in some areas of Quebec.
"More broadly, all Canadians must be concerned that a culture be allowed to develop of casual law-breaking," he said.
His proposal is to introduce a First Nations tobacco tax comparable to the provincial tax. "The proceeds could be used to fund the much needed development programs for the First Nations," said Mr. Kemball, citing the example of the Seneca Territories in the U. S. and pilot projects such as on the Cowichan reserve in Duncan, B. C., where the provincial tobacco tax is enforced, collected and retained by the First Nation.
The suggestion seems to have merit. The government said last week it intends to crack down on contraband but the RCMP has said enforcement alone won't be enough. First Nations have to be involved and Ontario regional chief Angus Toulouse has called on Ottawa to discuss a "mutually acceptable and workable solution."
It seems such a tidy solution that there must be a hitch -- and there is. Chief Toulouse speaks for the Assembly of First Nations, an organization not held in particularly high esteem by leaders on the reserves, mainly Mohawk such as Kahnawake, south of Montreal, where most of the manufacturing is taking place.
The Mohawks do not consider themselves subjects of the Crown. Nor do they recognize that the Canadian government has any legal authority on their land.
They may reach the conclusion it is time to impose some form of tobacco tax, especially if they are the beneficiaries, but they are clear it will be their decision.
A spokesman for the Mohawk Council of Kahnawake said his community would consider such a tax but, even if agreement were reached, it might not stop the flow of illegal tobacco. Tim Thompson, Grand Chief of the Mohawk Council of Akwasasne, said most of the manufacturing happens on the U. S. side of the border, for sale in Canadian cities, so a tobacco tax would have little effect. "To do so would require the willingness and cooperation of U. S.-based governments and agencies," he said.
Instead, he proposed that Akwasasne be allowed to keep proceeds from crime to support law enforcement on the reserve. "Our territory is comprised of numerous islands and tributaries that are difficult for outside law enforcement agencies to monitor. The agency best suited to patrol these hard-to-reach areas are Mohawk officers familiar with their own territory, but they currently lack the resources to do so," he said.
Either the tax or the proceeds of crime proposal should be examined by Ottawa as potential incentives to prosecute the crack-down on contraband with renewed vigour.
But neither goes to the crux of the problem -- the elephant in the room that no one wants to talk about -- sovereignty.
Neither Kahnawake, nor Akwasasne will countenance levying the federal excise tax. "We won't be the tax collector for an outside government," said Grand Chief Thompson.
Legislation currently stipulates that Status Indians, as defined by the Indian Act, are required to pay taxes on the same basis of other Canadians, except on personal property.
This is a dispute that goes to the heart of our relationship with those First Nations that are prospering and increasingly assertive: can we live in peaceful co-existence when we deem their behaviour contravenes our laws?
The issue was raised at a number of constitutional conferences through the 1980s. The Charlottetown Accord, if ratified, would have made aboriginal government one of the three orders of government under the Constitution, in addition to granting native Senate seats, special representation in the House of Commons, and rights that would have over-ridden the Charter. It remains one of the most important and unresolved dilemmas facing Canadian democracy.
The Mohawks can scarcely be blamed for wanting to improve their own condition. As Adam Smith also noted, this desire is so powerful that "it is alone and without any assistance capable not only of carrying on the society to wealth and prosperity but of surmounting the hundred impertinent obstructions with which the folly of human laws often encumber its operations."
At the same time, their activity, or at least the connivance of their governing councils, is impacting the health, wealth and welfare of the wider Canadian society.
The Royal Commission on Aboriginal Peoples (1996) advocated that native self-government should be broad-ranging and comprehensive, as long as it did "not have a major impact on adjacent jurisdictions". The schoolyard cigarette butt study suggests the repercussions of a situation that has spiralled out of control are being clearly felt beyond the reserves.
There is still no official third level of government in Canada under the Constitution, even if de facto self-government has been established under the Nisga'a Treaty and by a host of other agreements.
The bottom line is the federal government has to insist on its right to tax and not only specify the consequences for non-compliance, but act on them.
To do otherwise would be to cede sovereignty and create a very different version of Canada than the one we understand now. Enditem
