Higher N.L. taxes driving contraband cigarette market, says convenience stores association

The association that represents convenience stores in Atlantic Canada is raising concerns about contraband cigarette sales in Newfoundland and Labrador, but is getting little sympathy — or agreement — from anti-smoking advocates.

The association, which speaks for roughly 1,000 retailers in the province, says its members reported revenue declines from cigarette sales of anywhere from 20 to 50 per cent last year, compared with pre-pandemic times in 2019.

Two successive tax increases by the provincial government — one in late 2020 and another in June — and another by the federal government is being blamed by the association for creating a scenario that has opened the door to organized crime.

Tax-exempt cigarettes manufactured on First Nations territories in Quebec and Ontario are being shipped into the province in growing quantities, alleges association president Mike Hammoud, who is based in Halifax.

"The average price of a carton of legal cigarettes, which would be 200 cigarettes, is $175 per carton, including tax. You can get contraband tobacco for as little as $60 a carton anywhere in the province," said Hammoud.

Over the last two years, Hammoud said, roughly $20 in extra taxes has been added to a carton of cigarettes. He said that's driving smokers into the hands of bootleggers.

"We're hearing stories of people standing outside of convenience stores yelling to customers as they're coming in they can sell them a carton of cigarettes for a third of the price," said Hammoud.

CBC News asked numerous convenience store owners in the St. John's area for comment, but none would agree to a formal interview. Some said they feared reprisals for going public on the issue, with one blaming the slump in sales on tax increases by the provincial and federal governments

Newfoundland and Labrador has some of the highest tobacco taxes in the country, at 32.5 cents per cigarette.

The province also has one of the highest rates of smoking. According to the Canadian Cancer Society, 13 per cent of Canadians were regular smokers in 2020, the lowest percentage in recorded history, while the rate in Newfoundland and Labrador was 19 per cent.

For that reason, the Canadian Cancer Society applauds the provincial government for jacking up tobacco taxes, with Ottawa-based spokesman Rob Cunningham saying it's the best strategy for reducing smoking.

As for concerns raised by the convenience stores association, Cunningham is skeptical of the convenience store association's concerns.

"They have a commercial interest to exaggerate contraband [and] longtime links to the tobacco industry," he said.

Cunningham said he believes sales are down at convenience stores mainly because fewer people are smoking.