Ottawa Cracks Down on Tobacco

Source from:  Global TV Quebec 04/10/2009

The federal government has ordered a crackdown on licensing of tobacco manufacturers in the wake of reports that permits are going to people from organized crime and the contraband cigarette trade. Revenue Minister Jean-Pierre Blackburn announced yesterday that strict new rules for granting licences are in the works and no new permits will be issued without his personal authorization. Police are being brought directly into the process, with the minister now saying he will not issue licences without the RCMP checking into the records of applicants. Blackburn, who described the stunning recent increase in contraband tobacco as alarming, said he retains the ultimate power to "issue, revoke or suspend a licence" at any time. Blackburn's announcement comes after an investigation by The Gazette revealing the contraband industry has roared back to life after being nearly eradicated in the 1990s when federal and provincial governments dealt it a blow by lowering taxes, pushing smokers back into legal stores. So vast are the profits and so poorly are laws enforced, The Gazette's investigation showed, that the tobacco industry has attracted an unholy alliance of Mohawks and members of organized crime. But even as police struggle to stop the contraband, the Canada Revenue Agency has been issuing manufacturing licences to people in Akwesasne and Kahnawake who were later charged with racketeering and marijuana smuggling into the U.S., The Gazette revealed. Yesterday, Blackburn said his department has heard enough. It's time to get tough. "You probably saw it recently in the media," Blackburn said. "We have been criticized for having issued licences to people with dubious pasts. I have thus asked my deputy minister to review the licence issue process. We are looking into the flow and the frequency of our exchanges with the RCMP. I want us to get better at exchanging information with the RCMP before the issuing of a licence, during the lifetime of the licence and at the time of its renewal." Blackburn, who made the announcement to 350 members of the Canadian Convenience Stores Association - a group that represents dépanneur owners especially hard hit by the illegal cigarette trade - hinted more action is in the works, but he needs to consult his provincial counterparts before going further. He would not elaborate. "It's a blight that has reached such a level, in economic, social and public health terms, we can no longer stand with our arms crossed," he said. His announcement follows a growing body of evidence the contraband tobacco industry has regained the ground it had lost and is expanding. Yesterday, a study produced by one of Quebec's top business schools, HEC Montréal, and PricewaterhouseCoopers and Desjardins for the convenience store association said almost 50 per cent of the cigarettes smoked in Ontario and 40 per cent of those in Quebec today are technically illegal. Worse, youth smokers have an easier time getting cigarettes on the black market than in stores, where they are asked for proof of age. The study says a study of cigarette butts collected in Quebec schoolyards last year revealed 35 per cent were illegal. Contraband cigarettes are more toxic than regular ones, often containing up to 20 per cent more lead. The result for governments nationally is a loss of tax revenues. The study says Ottawa and the provinces lose $1.3 billion a year because of the illegal trade. The retail price of a pack of legal cigarettes is actually 70- per-cent tax. A legal carton of cigarettes retails for $50 to $60; a contraband carton is rarely more than $20. The study, which analyzes information from Statistics Canada and the RCMP, confirms organized crime is in the trade neck deep, too. The RCMP estimates 105 criminal groups - two-thirds of which are also in the drug trade - are involved. Thirty per cent of them are considered violent. But as Blackburn noted in his speech, 41 per cent of Quebecers and 60 per cent of Ontario residents do not realize that buying contraband cigarettes is an illegal act and do it in the belief they are beating the tax system. A Léger Marketing poll last year revealed 75 per cent of Quebec smokers regularly light up contraband cigarettes. Blackburn, who revealed he had worked in a dépanneur in his university years and understands the issues, announced his department is also launching an advertising campaign reminding Canadians that their actions have consequences. "I want smokers to be fully aware of the domino effect they start when they buy contraband cigarettes," he said. "Smokers need to know they are encouraging organized crime by buying smuggled tobacco." The one area Blackburn appeared not ready to touch is taxation, even though it figures high on the wish list of dépanneur owners, who have seen tobacco sales plunge 29 per cent in only two years. In 2008, an average of one dépanneur a day closed in Quebec because of a lack of business. Blackburn is caught in the middle. Quebec's anti-smoking lobby warned him on his way into the meeting to stand tough in the face pressure to cut taxes. Louis Gauvin, co-ordinator of Quebec Coalition for Tobacco Control, said now is not the time to ease up. Blackburn said the government has taken other actions including the seizure by police last year of 1,799,529 illegal cartons of cigarettes by police and numerous criminal charges. Yesterday, Michel Gadbois, vice-president of the convenience store association, which includes almost 6,000 Quebec members, said the battle for government action is just starting. "For us, this is a statement of intentions (by a minister). You will allow me to have doubts about the efficiency of the methods he's proposing if they are not linked to much stronger ones. What are we waiting for - that 75 per cent of the market or 80 per cent of the market (be contraband)? "Today is just the beginning." The association estimates honest store owners from coast to coast are losing $2 billion a year in revenues and $216 million in profits to contraband. Gadbois said there are a dozen other steps governments could take to curb the trade and none involve the politically touchy issue of sending police onto reserves to curb sales. "Canadian society does not have the luxury to watch its dépanneurs close one after another because criminals are taking over the market," Gadbois said. Craig Morin, a dépanneur owner from the Saguenay-Lac St. Jean region, said he has watched the sales of cigarettes in his network of stores drop from 140 cartons a week to 80. On the other hand, in 2008-09, 61 people in the region were charged with tobacco smuggling. "We are being strangled." Enditem