"Over the last six years, as Ottawa and provincial governments began hiking tobacco taxes to curb smoking and raise funds, the smuggling business has grown “exponentially,” according to the country’s national police force, the Royal Canadian Mounted Police (RCMP). At a time when a crumbling economy has forced governments into deficit financing, Canadian smugglers — dominated by members of Indian tribes and in some cases their mob partners — are pocketing hundreds of millions in profits. The cheap cigarettes not only fuel the spread of smoking, which costs Canadians more than C$4 billion annually in health care, but also rob governments of money that otherwise would go into official coffers to pay for healthcare and other services. The federal, Quebec and Ontario governments alone claim the proliferation of untaxed cigarettes is costing them at least C$1.6 billion a year.
All those contraband cigarettes are fueling a black market conservatively estimated at C$1.3 billion, with profit margins rivaling those of narcotics. And the market is growing rapidly. Seizures of contraband tobacco in Canada jumped a whopping 16-fold between 2001 and 2006, according to the RCMP. The off-the-books smokes range from independently-produced cigarettes sold in plastic bags to expertly counterfeited packs of leading brands. In some cases cheap Indian brands have become so popular that rival Indian manufacturers are counterfeiting them.
So vast are the profits, and so poorly are the laws enforced, that the contraband tobacco industry has attracted an unholy alliance of Canadian Indians — who say they have the right to sell untaxed cigarettes — and members of various organized crime gangs, according to law enforcement officials and the smugglers themselves. At the center of the trade are about 20 Indian-owned manufacturers that produce millions of untaxed and unregulated cigarettes a day out of small and medium-sized factories at Indian reserves in Ontario, Quebec, and across the border in New York State. An investigation by the International Consortium of Investigative Journalists has found that outlaw bikers, Italian, Irish, Russian, and Asian mobs are also now involved in the manufacturing, distribution, and retailing of the illicit tobacco products. According to Indian smugglers and police, in some cases the capital to buy the equipment and set up operations was fronted by organized crime."
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Canada’s Boom in Smuggled Cigarettes
(The Center for Public Integrity 3/27)
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