Contraband tobacco has been a recurring problem in Canada, and one that has become noticeably worse over the past decade. It has been estimated that contraband tobacco makes up roughly 30% of the total Canadian tobacco market. In 2009, the RCMP seized a record high of 975,000 cartons of contraband cigarettes. Key factors fueling the contraband trade include relatively high and rising tobacco excise taxes, the inability of law enforcement to impede tobacco smuggling, Aboriginal autonomy in taxation and on-reserve law enforcement, and the erroneous perception that lawful and contraband tobacco are close substitutes.
Health Canada contends that contraband tobacco undermines existent anti-smoking initiatives. Furthermore, the black market for tobacco deprives the private sector of business revenues and the public sector of excise tax receipts. Perhaps most alarming of all, the contraband tobacco trade has been linked by the RCMP and other law enforcement agencies to an assortment of related criminal activities.
This study proposes six policies for combatting the contraband tobacco trade.