Chris Selley: Ontario’s Contraband Tobacco Problem a Lesson for Getting Marijuana Legalization Right

Article by Chris Selley, National Post

Ontario’s contraband tobacco problem a lesson for getting marijuana legalization right

In its final report, the federal Task Force on Cannabis Legalization and Regulation offered its best advice for “keeping cannabis out of the hands of children and youth and keeping profits out of the hands of organized crime.” But it warned, “we may not anticipate every nuance.”

“After all,” it observed, “our society is still working out issues related to the regulation of … tobacco.”

That’s certainly true in Ontario. On Monday, the National Coalition Against Contraband Tobacco (NCACT) released its latest read on the market: provincewide, it reckons 32 per cent of cigarettes sold in the fourth quarter of 2016 were contraband; in Northern Ontario, it was a remarkable 51 per cent.

The problem is not new. And while it is complex, it is hardly mysterious. In Ontario, roughly 65 per cent of the cost of a carton is tax. That allows for huge profit margins on the black market, and the province could hardly be set up better to supply it.

First Nations businesses can legally sell cigarettes tax-free to their residents — but in practice, all are welcome. From the finance minister’s perspective, that’s a huge revenue loss: a decade ago, more than one-quarter of Ontario smokers reported having bought cigarettes on reserve.

Uniquely in Canada, Southwestern Ontario farmers grow tobacco. Controls over where their crops end up are, shall we say, less than ironclad. So there’s a ready supply for producers, legitimate and otherwise, in the area. Further afield there’s the Akwesasne First Nation, which straddles the Canada-U.S. border near Cornwall. Large quantities of American tobacco find their way to the U.S. side, and then north across the St. Lawrence River, to be made into cigarettes and either sold on-site or distributed.

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