contraband cigarettes
As we head to the polls in May, Albertans must consider an issue that impacts every Canadian, yet is virtually ignored by the federal government — the illegal contraband cigarettes trade. It’s a problem from coast to coast, and Alberta is especially at risk, having experienced a steep rise in illegal manufacturing, distribution and contraband cigarettes use over the past few years.

While the recent seizure of 14 million illegal cigarettes at the Montana First Nation near Hobbema by the Alberta government is a step in the right direction, the issue is far from resolved. The First Nations manufacturer of the cigarettes and the band chief are pursuing court action, claiming the seizure is illegal. But more troubling is the claim of the manufacturer, Rainbow Cigarettes, that provincial laws should not apply to First Nations manufacturers of cigarettes products. Since when in Canada is anyone, any group, or any business above the law?

Rainbow cigarettes speaks of its western expansion and its plan to ship cigarettes to reserves. This business plan is clearly based on the model of reserves in Ontario and Quebec in which unregulated “smoke shacks” sell cigarettes tax free to non-natives. These illegal sales led to more than $2 billion in lost tax revenue in 2009 and devastated the convenience store industry, forcing more than 2,300 convenience stores to close last year, mainly in Ontario and Quebec. Alberta and the other western provinces will face the same fate if this activity goes unpunished.

The very model for Rainbow cigarettes’s expansion assumes the federal government will not enforce the law and that the provinces will have no jurisdiction to enforce their own cigarettes laws on reserves. This will result in the closure of thousands more convenience stores as these unregulated and untaxed entities seize market share. Legal retailers simply cannot compete with First Nations smoke shacks that sell illegal product for less than half the legal price.

Of further concern is whether Rainbow cigarettes is adhering to the federal laws governing the manufacture and sale of cigarettes products. While it maintains it holds a federal licence to manufacture cigarettes, Health Canada or Revenue Canada has yet to indicate whether Rainbow cigarettes is complying with federal laws.

The Alberta government must defend its actions surrounding the January seizure on the Montana First Nation and the federal government needs to make an appearance on this issue and do the same. At a minimum, Alberta should ask Health Canada and Revenue Canada for a detailed report on whether Rainbow cigarettes is adhering to all existing laws.

Its business plan for Western Canada also requires immediate federal scrutiny since it is based on laws not being enforced. This is particularly timely since the federal government has just announced another proposal for additional regulations for the legal cigarettes industry — none of which will be enforced on First Nations if past experience is any guide.

If the goal of cigarettes taxes and cigarettes-control laws is to increase government revenues and decrease smoking incidence, then the laws should apply to everyone equally. If instead, those laws and taxes are intended only to punish law-abiding, taxpaying cigarettes retailers and give First Nations operators a huge competitive advantage in the market, then serious questions have to be asked about how any business in this country is conducted. Contraband is not just a smokers’ issue and its outcomes are too far-reaching to turn a blind eye. Look for leadership among those who recognize the problem and intend to extinguish the contraband trade once and for all.
Tip of the day: like this Camel.