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Organized Crime Has Major Role

Illegal tobacco sales is a highly complex problem that will take an army of politicians, tobacco industry types and police enforcement to resolve.

The tobacco industry says the illegal cigarette trade is mushrooming.

Karen Bodirsky, spokesman for Rothmans Benson & Hedges Inc., a member of the Canadian Tobacco Manufacturers Council, said contraband tobacco is a huge issue for the tobacco industry, making up 22% of all cigarettes smoked in Canada in 2007.

That’s up from 16.5% of all cigarettes smoked in Canada in 2006.

It costs Canada $1.6 billion in lost tax revenues each year. Illegal smokes are bought primarily through third parties and delivered to the consumer.

“Of that $1.6 billion across Canada, Ontario alone loses $565 million in taxes each year, which will grow to a billion in the next three years. The government agencies, revenue, cross-border taxation, and police enforcement all have to come together to resolve this issue because it’s growing out of control,” said Dave Bryans, president of the Canadian Convenience Stores Association.

The number of cigarettes legally produced in Canada in 2007 was 17,771,802,000, compared to 2006 when 25,146,208,000 cigarettes were produced.

In 1997, the number of cigarettes produced legally in Canada was 48,084,000,000, compared to 50,186,000,000 in 1996.

Bodirsky said the majority of illegal cigarette volume is concentrated in Ontario and Quebec, with one in three cigarettes sold being illegal. In Ontario, 31.5% of cigarettes bought are illegal, and in Quebec it’s pegged at 30.5%.

“It’s scary because it’s responsible for a significant infiltration of the society by organized crime. You can buy 200 contraband cigarettes for $10, which is incredibly cheap compared to $55 you pay in stores,” Bodirsky said, adding the bulk of contraband cigarettes is coming from New York State.

“Law enforcement is trying to make a dent in the illicit cigarette trade, but they’re not able to stop it,” said Andre Benoit, spokesman for JTI Macdonald Corp., a member of the Canadian Tobacco Manufacturers Council.

“Millions of dollars have been spent by governments on tobacco control … however, I am dismayed and angry when the good intentions of these programs are being thwarted by an out-of-control illegal cigarette trade,” Norman Inkster, former RCMP commissioner, said in a speech to a forum on the illegal sale of tobacco.

Inkster said the sale and trafficking of illegal tobacco products is not exclusive to Canada and is estimated to account for almost 7% of global tobacco consumption.

Inkster said if one converted the 7% into individual cigarettes, it represent 390 billion cigarettes per year. If you were to lay cigarettes end to end, the 390 billion cigarettes would circle the globe almost 730 times or make it to the moon and back 38 times.

Inkster said the illegal tobacco trade is not carried out by small renegade operators running “amateur” outfits.

“The reality is that highly sophisticated international criminal operators are increasingly dominating the picture,” Inkster said.

“According to INTERPOL, the organizations involved in the drug trade, people trafficking and arms smuggling are often also the ones behind the trade in illicit cigarettes and alcohol.”

Inkster said the proliferation of illegal tobacco is manufactured by a criminal element using a large, innocent and victimized population in Ontario, Quebec, and New York State First Nation reserves as safe havens for their criminal activity.

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