Illegal cigarette seizures are up in N.S. while tobacco tax revenues drop
Nova Scotia tobacco enforcement officers made significant strides in combating the illegal cigarette trade last year, seizing a record number of contraband products and laying dozens of charges. This heightened effort comes at a crucial time as provincial tobacco tax revenues have seen a significant decline in recent years.
Minister Jill Balser, who oversees Service Nova Scotia, acknowledged that contraband tobacco may be impacting the province’s bottom line. She highlighted the collaboration between Service Nova Scotia officers and the RCMP, which led to the seizure of 6.1 million cigarettes in the past year—a 38 percent increase from the previous year and more than double the seizures in 2022.
Despite these enforcement efforts, tobacco tax revenues have been on a downward trend, dropping by over a third since 2021—a $76 million decline according to provincial financial statements. Anti-smoking advocate Cynthia Gallard noted that this decline mirrors similar trends in other provinces, such as Newfoundland and Labrador, where tobacco tax revenues plummeted by 48 percent over a three-year period.
Gallard emphasized that while smoking rates have decreased, the rise of alternative products like vaping has shifted the landscape of tobacco consumption. The price disparity between legal and illegal cigarettes is significant, with contraband products avoiding high federal and provincial taxes. A recent court case revealed that illegal cigarettes were being sold at a fraction of the price compared to legal ones.
While the issue of contraband tobacco is undeniable, Gallard cautioned against weaponizing it to undermine tobacco control measures like higher taxes and health warnings. She highlighted a recent court settlement that will see tobacco companies paying billions to provinces and territories to recoup smoking-related healthcare costs, emphasizing that a functioning legal market is crucial for revenue flow.
Despite increased enforcement efforts, a recent investigation involving a Millbrook First Nation band councillor raised questions about procedural missteps. The judge in the case pointed out flaws in proving ownership and control of the raided smoke shop, leading to an acquittal.
Tobacco companies have historically raised concerns about contraband cigarettes, even as they themselves have been implicated in smuggling schemes. Danny Fournier, a senior manager at Rothmans, Benson and Hedges, emphasized the role of organized crime in the contraband trade and advocated for a balanced approach of awareness, enforcement, and taxation.
Quebec’s success in combating contraband was cited as a model to follow, with effective enforcement efforts and moderate tobacco taxes contributing to smaller revenue declines. As Nova Scotia continues to grapple with the challenges of illegal cigarettes, a multi-faceted approach that addresses both supply and demand sides of the issue will be crucial in safeguarding public health and maximizing revenue streams.
