MONTREAL - The trade in contraband cigarettes is thriving in Canada, particularly in Quebec and Ontario, a new study by the Canadian Tobacco Manufacturers' Council indicates.
The study, released on Thursday, says the trade has cost federal and provincial governments $1.6 billion per year in lost revenues. The majority of the illegal cigarettes are concentrated in Quebec and Ontario. Ontario accounts for 53.8 per cent of the volume and Quebec for 41.1 per cent.
The incidence of illegal brands has also risen significantly in the Atlantic provinces, where it has gone from 1.1 per cent in 2006 to 6.8 per cent this year.
"This is one of the most robust studies on the illegal cigarette issue and it clearly shows that this problem is not going away," said John Barnett, president of the manufacturers' council and Rothmans, Benson and Hedges Inc.
"Last year the study confirmed the scope of the problem. This year the study clearly demonstrates that the problem is growing and spreading."
Illegal cigarettes were defined for the survey as cigarettes and tobacco sold by individuals who are not paying the appropriate taxes or duty.
Those smoking illegal cigarettes in Ontario has risen to 31.6 per cent this year from 23.5 per cent in 2006. Thirty-seven per cent of smokers in Quebec pull contraband smokes.
The council says traffickers in illegal cigarettes often also sell guns, contraband liquor and drugs.
The cigarette manufacturers acknowledge that cheap prices are what's spurring the contraband market.
"They're cheap and they're available," said Catherine Doyle of Imperial Tobacco Canada.
"They're very easy to get a hold of and it's getting easier for people to purchase illegal tobacco, whether it's in the trunk of a car or whether they're going and purchasing it from different sources or having it delivered directly to them.
"Basically it's the price. It's a lot less expensive than a legal brand."
The council said the source of the contraband tobacco has changed since the 1990s. The trade was based then on popular brands that were exported to the United States and then brought back into Canada and sold without charging tax.
Now the industry is based on tobacco imported in bulk from China and South Africa and then made into cigarettes on aboriginal reserves and sold without taxes.
"About 95 per cent of the cigarettes are manufactured on aboriginal reserves," said Yves-Thomas Dorval, a spokesman for the council.
"The first place to develop a contraband network is always close to the source."
The illegal cigarettes can be sold for $6 per carton, unlike the $50 to $70 cost on the regular market, depending on the province.
The survey polled 2,057 people by questionnaire in May and June and has a margin of error of 2.2 percentage points, 19 times out of 20. It was conducted by GfK Research Dynamics.
