Illegal Tobacco Trade Costs Canada’s Government $2.5 Billion, Claims Imperial Tobacco
According to Imperial Tobacco Canada, tobacco smuggling in Canada results in billions of dollars in lost tax revenue annually, with illegal cigarettes costing the government the most to date.
The company’s submission to the Senate National Finance Committee reveals that smuggled cigarettes make up nearly 40 percent of the tobacco market in some provinces.
Moreover, organized crime groups involved in Canada’s illegal tobacco trade use it as a lucrative source of funding for criminal activities like drug and weapons trafficking.
Imperial Tobacco commissioned Abacus Data to conduct research in British Columbia, Alberta, and Ontario to assess the extent of the illicit market. The findings showed illegal tobacco rates of 36 percent in Alberta, 34 percent in British Columbia, and 33 percent in Ontario, the highest rates recorded thus far for Alberta and British Columbia.
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According to Imperial Tobacco, approximately one-third of Canada’s national tobacco market is comprised of black-market products, with this proportion on the rise in recent years.
The Canada Revenue Agency collects $1.8 billion annually from tobacco taxes. However, Imperial Tobacco’s estimate of a $2.5 billion annual loss far exceeds the previously calculated $400 million loss disclosed by the Cabinet in a 2023 inquiry.
The report also highlights that around 3.8 million Canadians, representing 11 percent of the adult population, are either occasional or daily smokers, a figure that has remained stable since 2013.
The report points out a decrease in legal tobacco sales and a simultaneous rise in the contraband tobacco market in these provinces since 2019. It also notes that illegal cigarettes, sold tax-free and without meeting Health Canada regulations, are significantly cheaper than legal tobacco.
Furthermore, the report highlights that selling illegal cigarettes is more profitable than dealing with illicit drugs, with less severe penalties for trafficking cigarettes. British Columbia alone is estimated to have lost between $215 million and $591 million in tobacco tax revenue due to illegal sales between 2019 and 2022.
