OPINION: The problem of contraband cigarettes in Newfoundland and Labrador is costing us all, but especially small convenience stores

What will it take for the government of Newfoundland and Labrador to do something about the explosive growth of illegal cigarettes in the province?

From St. John’s to Corner Brook to Happy Valley-Goose Bay, our members tell us that business is down, and they are frustrated that people in their communities are selling illegal cigarettes for money, often just outside their stores.

This problem isn’t new, but it’s worse than ever and growing so rapidly that it now threatens the livelihoods of hundreds of small business owners – and the communities they serve. It is high time the provincial government did something to crack down on this criminal activity.

What is most troubling is the impact of illegal cigarettes on family-owned independent convenience stores. These are run by hard-working, law-abiding citizens who care deeply about the communities they serve. Often these retailers offer postal services, license purchases and other services that people would otherwise have to drive a long distance to access.

And retailers rely not only on tobacco revenue, but also on other purchases that generate significant tax revenue for the government. Every customer who chooses to buy illegal cigarettes is a customer who should have been in our local stores to also buy milk and bread. These small operators simply cannot afford to keep the lights on and pay their employees without customers. Some have already had to close.

Mike Hammoud is the president of the Atlantic Convenience Stores Association.  - Saltwire Network
Mike Hammoud is the president of the Atlantic Convenience Stores Association. – Saltwire Network

Tobacco tax revenues are an important source of revenue for Newfoundland and Labrador. The hundreds of millions of dollars raised each year are used to fund schools, roads and other essential public services. But with the highest tobacco taxes in Canada coupled with the widespread availability of illegal cigarettes, those revenues are falling and fast. Some stores are reporting a 50% drop in tobacco sales over the past year.

For a long time, we only had anecdotal evidence of the size of the illegal cigarette market in Newfoundland and Labrador. That all changed with the release of a study by Ernst and Young (EY) that looked at the impact of pandemic-related disruption on the illegal cigarette market.

In June 2020, EY noted that the illegal tobacco trade in the province had been temporarily halted due to COVID-19 related border closures in the Atlantic provinces and closures of illegal cigarette factories in central Canada. . During this period, convenience stores in this province have seen their sales of legal tobacco products increase by nearly 50%. For the Government of Newfoundland and Labrador, this represented $3.5 million in additional tax revenue in just one month. When borders reopened and illegal factories started producing, black market tobacco returned in droves. This means that illegal cigarettes now cost our province at least $40 million a year. The actual costs are probably much higher.

Some stores are reporting a 50% drop in tobacco sales over the past year.

According to the RCMP, illegal cigarettes are smuggled into our province by criminal organizations who use the proceeds to finance their various criminal activities, from the sale of firearms and drugs to human trafficking. Why are we allowing these criminals to operate with impunity while hard-working small business owners suffer?

The government must stand up for these small businesses and the communities they serve by cracking down on smugglers and illegal sellers of cigarettes. On behalf of the thousands of hard-working convenience store employees in Newfoundland and Labrador, we call on the provincial government to give law enforcement the mandate and resources to pursue smugglers and cigarette sellers. tobacco and to work with other provinces to stem the flow of illegal tobacco into our province.

Contraband costs us all. It’s time to tackle the smuggling problem head-on. This negatively impacts government, convenience stores and all the communities they serve.

Mike Hammoud is the president of the Atlantic Convenience Stores Association.

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