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Ontario Losing Millions in Tobacco Tax Each Year to Contraband on Reserves

December 19, 2012
Ontario Losing Millions in Tobacco Tax Each Year to Contraband on Reserves
  • New data suggests up to 79 per cent of all tax-exempt allocation tobacco sales made on reserve ‘smoke shacks’ were likely illegal in 2011-12
  • Ontario and Ottawa losing between $742 million and $1.2 billion a year in tax revenue due to contraband

OTTAWA, ON: The Canadian Taxpayers Federation (CTF) released a new report today showing that together the provincial and federal government are losing upwards of $1.2 billion dollars annually in tobacco tax revenues due to contraband tobacco sales in Ontario alone.

The report also examines the Ontario government’s Cigarette Allocation System (CAS) for on-reserve ‘smoke shacks.’ New data on the CAS has been obtained by the CTF from the Ministry of Finance through a freedom-of-information request (FOI). The CAS is a formula that dictates how much unmarked tobacco can be officially sold in reserve ‘smoke shacks,’ tax-free to Status Indians.

According to calculations done by the CTF, every smoker over the age of 15 on reserve would have to smoke 70 cigarettes per day, every day, in order for Status Indians on Ontario reserves to have legally purchased every single cigarette legally provided to smoke shacks through the allocation system.

“There are only two logical explanations here,” said Gregory Thomas, CTF Federal and Ontario Director. “Either we’re looking at some sort of unprecedented smoking epidemic on Ontario reserves, with every smoker puffing three packs a day or most of the tax-free tobacco is being sold at cut rates illegally to people who are not Status Indians.”

With one half of one per cent of Ontario’s population, Ontario reserves account for six per cent of the province’s official tobacco consumption, just through the allocation system. That does not count the sale of other contraband cigarettes, such as plastic bags of unmarked cigarettes.

The CTF is recommending the Ontario government cut in half the allocation formula for providing tax-free cigarettes to smoke shacks, negotiate a tax-sharing agreement with the bands, review current tobacco tax levels and implement a cigar allocation system.

According to the documents obtained through FOI, on-reserve smokers would have to be consuming 1,079 cigars a year, for all cigar sales to be legal. Ontario, Nunavut and the Yukon Territory are the only jurisdictions in Canada not to have a cigar allocation system for reserve smoke shacks.

“You don’t find everyone on reserve with a stogie in their mouth, telling you it’s their third of the day,” continued Thomas. “It’s clear the vast majority of cigars are being sold tax-free to people who are not Status Indians.”

“Tobacco taxes should apply to all Canadians equally. We need to fix a system that feeds a black market that supports criminal activity,” continued Thomas. “With the federal and Ontario governments both running multi-year, multi-billion deficits, they can no longer turn a blind eye to the millions in lost tax revenue they should be collecting.”

The CTF’s report, entitled How Much is Contraband Tobacco Costing Taxpayers in Ontario? can be downloaded here.

 

 

 

By
on December 19, 2012
Interesting how the CTF supports increasing tax on natives rather than repealing or decreasing the tax everyone else is paying. Increasing taxation will only expand the black market, only lowering taxation will shrink the black market.

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By
on December 19, 2012
This is ridiculous. You are ignorant.

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By
on December 19, 2012
Perhaps you need to educate yourself further on the treaty rights of Aboriginal people's of this country before you make sweeping statements on public radio and on your site. First off - Aboriginal people consist of status, non status, Metis and Inuit people's. Reserves and the laws on reserves regarding sales of goods was created by the Canadian government this includes the 'tax free' items. It is interesting that there are many in the country who say many things about Aboriginal people's being 'lazy, free loading, etc etc' but when the 'Indians' make money it becomes an issue. Why is your issue not with the thousands of non Aboriginal people who make it a habit to head to the 'Rez' to purchase their smokes? Why do you have to place Aboriginal people as being the only bad guy in this situation??? Questions to you...why is it not okay for Aboriginal people on a reserve to make profit? Yet it is okay however for Aboriginal people to shop off reserve so others can obtain profit? We all know that if Aboroginal people were receiving all the gazillion dollars everyone thinks they receive there would be more retail stores on reserve and more non aboriginal people would surely be shopping there to receive their tax free items just as much as they cross the border to shop in the US for cheaper items - BUT - it would not happen on the reserve as the 'Native' people would be gaining profit! So in other words it is also okay for Non Aboroginal people to purchase Aboriginal art , craft and even gas or other products on a reserve but NOT tobacco products??? Any one can purchase items on reserve STATUS or NOT! Is it also okay then for non Aboriginal people to make profit via appropriating Aboriginal designs, cultural aspects etc off reserves (government issued land) but not okay for Aboriginal people to find loop holes and make profit on their designated land?? Just some thoughts that popped up during your sweeping negative comments about Aboriginal people. Oh and by the way - I am a tax paying Indian who does not purchase cigarettes on a reserve!

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By
on December 19, 2012
I would be happy to buy DuMaurier or Rothmans at a reasonable price and Support Ontario industry, but oops the Government of Canada taxed them out of existance.They don't come from here anymore. As for aboriginal cigarettes, they are toxic and make me puke.

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By
on December 19, 2012

The issue with thousands of non Status Indians purchasing cigarettes on reserve is that too often they purchase allocation tobacco that can only legally be sold to Status Indians.  Therefore, the sale is illegal.

These are not "loop holes," it is illegal activity. 

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By
on December 19, 2012

Might want to read the report before you comment...

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By
on December 20, 2012
The onus is normally on a seller to meet legal requirements on the sale of certain goods. For example, selling tobacco (or alcohol for that matter) to minors is illegal in Ontario. I'm sure there are merchants out there that would turn a blind eye to this and make have huge profits if they could. Similarly, selling allocation tobacco to non Status Indians is illegal. It is just not enforced. I did not see the article as an attack on a particular group. It highlights a big problem overall. Do the profits from the illegal cigarette sales go to the Aboriginal communities and help support them? Doubt it. Defending the illegal self-enriching activity by some members of the community is a gross disservice.

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By
on January 02, 2013
There are no Indian Act reserves in Nunavut or Yukon. So no indian tax exempt sales.

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By
on January 10, 2013
Obviously, these Indian run smoke shacks are breaking the law by selling to non-status Indians. It is also reasonable to assume that these illegal sales would find their way into the hands of underage buyers. By not levying the taxes on status Indians we are helping kill them and their illegal customers and driving up the cost of the healthcare for hundreds and thousands of people. The only solution to this mess is to levy the same taxes on all cigarettes regardless of who the buyer is.

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By
on November 12, 2013
LOL funny how the Govt gets its panties in a bunch when cigarettes are "Contraband" and they lose tax, but preach that no one should be smoking. Am I the only one that smells the smoke being blown up our asses?

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