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The Hon. George  Furey, Q.C., B.A., B.A. (Ed.), M.Ed., LL.B. A distinguished educator and lawyer with deep roots in the community, Senator George Furey is one of the leading citizens of Newfoundland and Labrador. He was appointed to the Senate on August 11, 1999, by the Rt. Honourable Jean Chrétien.

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Contraband Tobacco

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Statement made on 17 June 2010 by Senator Jane Cordy

Hon. Jane Cordy:

Honourable senators, I rise to speak today to Senator Segal's inquiry on the increasing problem of contraband tobacco in Canada; and in particular, the availability of these products to Canada's youth and the negative financial effect on convenience store owners and taxpayers of Canada. I would like to thank Senator Segal for the work that he has done on this file and for bringing the inquiry on contraband tobacco to the Senate.

We know that tobacco is the leading preventable cause of death. Tobacco does a great deal of harm and is responsible for the deaths of about 37,000 Canadians every year. These are deaths that could be prevented. More than 5 million people die from the effects of tobacco every year worldwide.

Tobacco is the only legal consumer product that kills when it is used exactly as intended. Up to half of all smokers will die from some tobacco-related disease, all the more reason to take action to prevent young people from taking up the habit of smoking, and to encourage current smokers to quit.

Honourable senators, the growing contraband tobacco industry increasingly undermines the efforts of Canada's legislative bodies to curb youth smoking. It is the number one threat to decreasing tobacco use in Canada, especially among teens. The contraband tobacco market also fuels organized crime and threatens the livelihoods of legitimate small business owners who rely on tobacco sales for the majority of their profits.

In 2008, it was reported that nearly 3 billion more contraband cigarettes were sold in Canada than were sold in 2007. That is a shocking number, and all evidence indicates that these numbers are continuing to rise.

Nowhere does the availability of cheap contraband tobacco have as high an impact as on the young people in our communities. We know that the number one deterrent to youth smoking is the price factor; but with bags of 200 contraband cigarettes selling for as low as $10, compared to the retail price for the same quantity being between $50 and $55, the price deterrent is eliminated. The result is that more young people take up smoking, and they smoke more frequently because of the cheap- priced cigarettes.

The National Coalition Against Contraband Tobacco in 2009 conducted a study of the concentration of contraband cigarettes on 110 high schools around Ontario and 85 schools in Quebec. They found that over 30 per cent of cigarette butts collected in Ontario and 45 per cent collected in Quebec were contraband. The Centre for Addiction and Mental Health's Ontario Student Drug Use and Health Survey claims that 60,000 Ontario high school students smoke contraband cigarettes at some point in 2009.

Honourable senators, that is an astounding number. These results clearly indicate that Canada's youth are being targeted by the contraband tobacco industry — and honourable senators, it is an industry. The smoking rate among our teens is on the rise.

Over the past several years, the illegal tobacco trade has been allowed to get a solid foothold in Canada. The economic trickledown of the illegal cigarette industry has seen small convenience store operations close at an alarming rate. Last year, 285 stores closed in Atlantic Canada, and in Ontario, 800 stores shut down. The Ontario industry also saw 5,000 employees let go from convenience store jobs. Tobacco products make up a large percentage of these small business profits and without these sales, their businesses are no longer financially feasible.

The contraband industry is not the sole factor in these stores closing, as a poor economy has had its effect as well. However, when a person bypasses purchasing legal tobacco and buys contraband cigarettes, the small store owners lose a customer who would normally purchase add-on items, such as milk or juice.

It goes without saying that the financial loss to federal and provincial governments is quite substantial. Persons purchasing an illegal product of any kind are obviously not paying tax. If the government needs motivation to act now, how about the nearly $2.4 billion in tax revenues lost to the contraband tobacco industry each year.

Honourable senators, I would like to add that this is not just lost revenue to governments, but revenue lost to the taxpayers of Canada.

Last fall, I participated as a member of the Social Affairs, Science and Technology Committee which studied Bill C-32, An Act to amend the Tobacco Act banning the sale of flavoured tobacco in Canada. As well, I was the opposition critic for the bill. I supported the bill and its intentions and I spoke at second and third readings in favour of banning the sale of flavoured tobacco. I still support it. Fewer tobacco products available on the market to entice new users is always a good thing.

Unfortunately, with Bill C-32 becoming law, it had unintended but certainly not unforeseen consequences. The fear was always that banning these products would not remove them from society, but rather push them into the black market, where now organized criminals hold a monopoly on the market. Bill C-32 was quite limited in its powers. I noted as much in my speech at third reading of Bill C-32.

What is required is a serious and concerted effort at the federal level to address the problem of contraband tobacco and develop a national action plan.

Honourable senators, I was encouraged to hear the government's May 28 announcement regarding contraband tobacco initiatives, which include a public awareness campaign by the Canada Revenue Agency to raise awareness of the impacts of buying contraband tobacco, the Dog Detector Service in Montreal and Vancouver and the establishment of the RCMP Special Contraband Tobacco Team.

As Mike Hammoud, President of the Atlantic Convenience Stores Association stated, this is a very good starting point. I do agree that this is a good start.

Honourable senators, there must be better consultation between federal departments and agencies with stakeholders when developing government policies. During the hearings on Bill C- 32, I was discouraged with the frequency witnesses testified that no consultation took place with them in conjunction with developing Bill C-32. They had requested inclusion, but they were ignored or flatly refused.

This is where I believe the Senate is in a position to act. The Senate has the benefit to provide the focused and extensive analysis of the issue of contraband tobacco. A Senate committee inquiry would allow for a comprehensive study of the issues and provide a forum for stakeholders to participate in the debate at the federal level to provide valuable insight and perspective. It will take the input and the inclusion of many groups, from law enforcement, from anti-tobacco and health advocates and from First Nations stakeholders, as well as those who rely on the legal tobacco sale industry for their livelihoods.

I applaud Senator Segal's efforts to initiate a Senate study on the issue of contraband tobacco, and the honourable senator has my full support.


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