TORONTO - The Liberal government must use its spring budget to crack down on the growing illegal cigarette trade which is costing millions in lost tax revenue and hurting small convenience stores, the Canadian Convenience Stores Association will tell pre-budget hearings Monday.
Dave Bryans, president of the association, said almost one-third of smokers are getting their cigarettes illegally -- many originating from aboriginal reserves. That means traffic in many convenience stores has dropped as well, costing small business owners, he said.
"It has a huge impact,'' said Bryans, who is appearing before the province's finance committee Monday for pre-budget consultations.
"If 31 of your regular, daily habit customers don't come in to buy products, they also don't buy gum, chips, lottery tickets. Our whole sales volumes are down everywhere, store by store.''
A recent study conducted for the Ontario Tobacco Research Unit found one-quarter of Ontario smokers avoided hefty tobacco taxes by buying their smokes from aboriginal reserves.
The practice, which was more widespread in northern Ontario, cost the province an estimated $72 million and Ottawa nearly $50 million in lost taxes between January 2005 and June 2006.
One-third of smokers may be buying illegal cigarettes now but Bryans said that number will continue to rise unless something is done.
"Everyone is ignoring the issue and hoping that somebody else will solve the problem,'' Bryans said. "The government has to come to the table and say 'How are we going to combat this?'''
Steve Erwin, spokesman for Finance Minister Dwight Duncan, said the minister has been travelling the province holding almost a dozen pre-budget consultations of his own for weeks and the issue hasn't been raised once.
Erwin wouldn't say whether the Liberals are considering a crackdown on smuggled cigarettes in the coming budget, citing budget confidentiality. But he said any time the government loses tax revenue "it's always a concern.''
The province has taken steps to fight cigarette smuggling, he added.
In the last three budgets, the Liberals have increased court fines and brought in new penalties for smugglers. The province has also increased the number of government inspectors and made it easier for government investigators to share intelligence with federal, provincial and municipal agencies that enforce tobacco-related laws.
But Michael Perley, with the Ontario Campaign for Action on Tobacco, said he doesn't have much faith that the province will tackle the issue more aggressively.
Perley said he applied for standing at the pre-budget committee to talk about the need to curb illegal cigarettes but wasn't selected to appear by the Liberal-dominated committee.
The Liberals are too worried about infringing on aboriginal reserves that they are refusing to attack the problem adequately, he said.
But the extensive smuggling operations are putting cigarettes in the hands of kids and directly undermining the province's anti-tobacco strategy, he said.
"The government is very cognizant of the problem but they're quite concerned about the kind of reaction they may get if they take any step at all,'' said Perley, adding the province can do a lot more to fight smuggling.
Quebec has the power to cut off the raw materials -- like cigarette filters and papers -- sent to illegal manufacturers and Ontario can do the same, Perley said.
The province can also give its tobacco enforcement officers the power to seize contraband cigarettes and do a better job of tracking the tax-exempt tobacco that is sent to reserves under the current quota system, he added.
But Conservative Bob Runciman said there is "no chance'' the Liberals will take on illegal cigarette makers and vendors in the budget. The Liberals treat aboriginals with "kid gloves'' and this is no exception, he said.
"Forget the enforcement of the rule of law,'' Runciman said. "They're just treating these folks very differently than they would you or I. They're afraid of any kind of confrontation. Even with the threat of confrontation, they get cold feet.''
