Tax hike means bigger black market for illegal smokes, advocacy groups say

Two advocacy groups say the Ontario government cigarette tax hike that took effect Friday will prompt more smokers in the province to buy contraband tobacco.

"I think we already in Ontario have the biggest contraband cigarette market in the country, " Christine Van Geyn, the Ontario director of the Canadian Taxpayers Federation, said in Toronto.

"It will drive even more people to the black market."

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As of Friday at midnight, taxes increased from 13.975 cents to 15.475 cents per cigarette, or $3 per carton of 200 cigarettes.

"This is a really quick move by this government. Maybe they're hoping nobody notices it," she said. 

Gary Grant, spokesperson for the National Coalition Against Contraband Tobacco, said in Toronto the tax hike will make the sale of contraband tobacco more lucrative.

 "With one in three cigarettes purchased in Ontario already contraband, an increase in the price differential between legal and illegal product will make it easier for the 175 criminal gangs involved in the trade to profit and fund their other illegal activities, including guns, drugs and human smuggling," he said.

"Large tax increases, such as this, drive consumers to seek less expensive alternatives, which is counter-productive to the province's contraband enforcement commitment."

Health Minister Eric Hoskins said the cigarette tax hike was designed to discourage Ontario residents from smoking or to encourage them to smoke less. 

"It's been proven that the price of a package of cigarettes does impact directly on an individual's decisions to either take up smoking or their volume of smoking," he said.

May give smokers pause

Ontario resident Yuania Manresa said the tax increase may not have the desired effect.

"The government is going to keep going up and up and up, but the people are going to still be smoking." 

Kathryn Walton, another Ontario resident and a smoker, said the tax increase will give her pause. "I'm going to have to cut down on smoking, or completely stop."

Contraband cigarettes are produced in 50 illegal factories in Canada, largely in Ontario and Quebec, according to the National Coalition Against Contraband Tobacco.

The Canadian Taxpayers Federation has estimated that illegal cigarettes cost an estimated $689 million to $1.1 billion in lost tax revenue in 2011 to both the federal and provincial governments in Ontario.

It said the sale adds up to an estimated $3.4 billion to $5.5 billion over the last five years.