Untaxed tobacco makes millions for criminal groups and sells for $5 a pack in Saskatoon

Alberta officials say an estimated $12.3 million in illegal cigarettes and cigars has been recovered in Edmonton. (Supplied)

If you’ve noticed a massive uptick in seizures of unstamped, contraband tobacco in recent years, you’re not alone.

According to Rick Barnum, a retired deputy commissioner for the Ontario Provincial Police, the trade in black market cigarettes has become a cash cow for nearly every major criminal organization in Canada, and he says it’s costing the Saskatchewan government millions in unpaid tax revenues every year.

According to revenue data from the Saskatchewan Ministry of Finance, the government received over $122 million from the sale of tobacco in 2024-25, and it’s projecting revenue of $150 million for 2025-26.

“The reality is, they’re not making half of that,” said Barnum, who now serves as director of Stop Contraband Tobacco, an industry-funded group intent on snuffing out this smouldering black market.

“Governments are losing millions and millions of dollars every year.”

Instead, he says the money is going to the approximately 145 criminal groups actively manufacturing and smuggling tobacco products across Canada.

“All the organized motorcycle crime groups, all Italian organized crime, Asian organized crime … Russian; they’ll all be in that space in a big way.”

Illegal cigarettes can also be purchased online, making Canada Post staff the unwitting smugglers, says Barnum.

In October 2024, the Saskatchewan government started requiring law enforcement officers to report all seizures of illicit tobacco to the Ministry of Finance — a sign of a growing awareness of the problem and an effort to measure the cost.

One year later, a semi driver from Brampton, Ont., drove through a check stop at the weigh scale outside Langham, Sask. — about 20 minutes northwest of Saskatoon. RCMP officers pulled it over and escorted it back.

In the trailer, they found 24 pallets of unstamped tobacco. According to the RCMP, that’s 9.3 million illegal cigarettes that could have generated over $4.4 million in tax revenue.

“That one tractor trailer is just over $1 million for organized crime groups,” says Barnum.

In Saskatchewan, the penalty for an individual getting caught with more than 1,000 unstamped cigarettes is $10,000, two years in jail, or both.

When you compare that to the risks associated with trafficking other illicit products like cocaine or fentanyl — potentially up to life in prison — Barnum says the illicit tobacco trade looks like easy money.

“There’s nothing else that could make them as much money as contraband tobacco.”

In a statement to CTV News, an RCMP spokesperson said its federal police work closely with domestic and international partners to disrupt the illicit market, including through the gathering of intelligence and enforcement activities.

“Illicit tobacco has significant negative economic and health impacts on our communities and diminishes the success of tobacco control initiatives.”

Physicians for a Smoke-Free Canada, a health advocacy group, tracked the early rise in the contraband market in a 2008 report on trends in Canada’s tobacco growing industry.

In the wake of 2001 Sask. legislation prohibiting smoking indoors and the introduction of stronger public health labelling about the consequences of the addictive and deadly product, Smoke-Free Canada noted a sharp rise in the illicit trade.

“It has been estimated that contraband accounted for 10 per cent of consumption in 2005, 16.5 per cent in 2006 and 22 per cent in 2007,” the report said.

“Contraband further depresses the demand for legal purchases of tobacco leaf for legal tobacco manufacturing.”

Now, Stop Contraband Tobacco estimates up to 45 per cent of smokers across the country are opting for the untaxed version.

Who is buying unstamped cigarettes?

It’s not hard to see the appeal of illicit tobacco, from a consumer perspective.

A carton of 200 cigarettes sells for between $140 to $160, depending on the brand. With a tobacco tax in Saskatchewan of about 29 cents per “stick,” or cigarette, that’s $58 in tax per carton — and that’s not including federal excise taxes and duties.

One online vendor identified by CTV News offered cartons for about $50, with free shipping for orders over $100.

For an addicted smoker with a pack-a-day habit, those savings add up.

If they’re buying taxed cigarettes by the carton — the least expensive route — they’re still spending well over $5,000 per year, compared to just under $2,000 a year for someone smoking one pack every day who buys the illicit brands by the carton.

A 2011 study from the Fraser Institute — also a member of Stop Contraband Tobacco — argues that relatively high tobacco taxes in Canada enable the flourishing trade in bootleg cigarettes.

In the study, Combatting the Contraband Tobacco Trade in Canada, the conservative-leaning economic think-tank suggests a suite of policies to mitigate the illicit market, including tax partnerships with First Nations communities, the revocation or reduction of tobacco taxes, better record keeping by the RCMP, educational campaigns and increased enforcement.

No matter what products consumers smoke, however, taxpayers are on the hook for increased healthcare expenses.

• Smoking costs the Sask. economy $1B per year, critics call for action

Like illegal drugs, Barnum says unstamped tobacco is often sold hand-to-hand, with someone one or two steps removed from the criminal organization buying a bulk amount and distributing it.

But in Saskatoon, CTV News has observed at least one convenience store in the city’s west side that sells untaxed tobacco over the counter. The shop sells packs of “Canadian Classics Original” for $5, held by the till in a repurposed box of Rice Krispies Squares.

The packs bear a Health Canada warning about second-hand smoke but lack a federal excise stamp. On the side, they have a label that says “Made in First Nations Territory.”

Where do illegal cigarettes come from?

The RCMP told CTV News the tobacco is generally grown in the United States and purchased by manufacturers on First Nations territory in the U.S. and Canada.

“It is then processed/transformed into fine cut tobacco and a finished product (i.e. cigarettes), and smuggled into Canada by transport truck, van or pickup truck, through Customs or by boat via the St-Lawrence River,” the RCMP said in the statement.

According to Barnum, 90 per cent of the untaxed cigarettes sold in Canada are made in Six Nations of the Grand River, Ont., or Kahnawake, Que.

Six Nations is Canada’s largest reserve and home to the largest First Nation-owned private cigarette manufacturer in the country, Grand River Enterprises.

According to a 2019 report from Toronto Life Magazine, Grand River Enterprises initially fought the federal government in court arguing it was not required to pay duties and excise taxes on its products under the terms of the Indian Act, but after several years operating without a licence, agreed to cooperate, incorporate and pay the tobacco tax.

Barnum is quick to point out those First Nation communities are not responsible for the black-market trade, but generally a few members who collude with criminal organizations and operate under the radar.

“It’s not the entire community, it’s a few select millionaires from those communities,” he said.

In a recent bust of an illegal tobacco manufacturer in Six Nations, provincial and Six Nations police said much the same thing — the enterprise was “operated by a non-Indigenous criminal network who do not reside on the territory.”