Ontario lost more than $1B in tobacco taxes to contraband cigarettes: report

Up to one in every two cigarettes sold in Ontario is now illegal, costing the province more than $1 billion, according to a new report.

The Convenience Industry Council of Canada (CICC) says sellers of illegal cigarettes brought in more than $2.3 billion in sales last year, with contraband smokes making up roughly 53 per cent of the Ontario cigarette market.

The report prepared for the CICC indicates one in two cigarettes sold in the province may be illegal.

“Not only is it a lot of cigarettes, but it’s a lot of tax dollars being handed over to organized crime,” said Anne Kothawala, president of the CICC.

Kothawala said contraband cigarettes cost the province more than $1 billion in tobacco tax from 2023 to 2025.

“Basically we can’t compete with this illegal market,” Kothawala said. “People start to make choices and they go elsewhere. They either go online and there are literally hundreds of sites where you can buy a carton of cigarettes for $35.”

The cost of a carton of legal cigarettes in Ontario ranges from $90 for budget brands up to more than $160 a carton for premium brands.

Retired Ontario Provincial Police deputy commissioner Rick Barnum said contraband cigarettes were never really a priority for police forces.

READ MORE: OPP seize about 2M unmarked cigarettes in Ancaster traffic stop

“In my experience, when I was deputy commissioner of investigations and organized crime, it was never really a priority for us, contraband tobacco was always something we would sort of work on in the fringe,” says Barnum. “I’d say that probably hasn’t changed a lot, with the exception of Quebec.”

Police forces such as the RCMP, OPP and Canada Border Services Agency (CBSA) have been making busts.

In June, police seized more than 40,000 kilograms of counterfeit cigarettes on Six Nations, valued at more than $10 million.

The CBSA says that since Jan. 1, its officers have seized more than $52 million in tobacco and nicotine products.

However, the CICC says it wants to see even more enforcement.

“There have been increased busts, and that’s the good news. The bad news is people are out with a very insignificant fine,” Kothawala said. “Some fines are less than a parking ticket.”

“One tractor-trailer full of contraband cigarettes that moves across our country, by the time it leaves the source and goes to the destination, it’s a million dollars profit for organized crime groups,” says Barnum. “Let’s see penalties that reflect that kind of profit for organized crime.”

Police and the CBSA say that with relatively low production costs, illegal tobacco can generate substantial profits for organized crime groups. The profits can then be used to support other criminal activities, including the trafficking of illegal drugs and firearms.

READ MORE: 8.4M contraband cigarettes seized in Brant and Haldimand County: OPP