Organized crime behind contraband tobacco costs governments billions
Madeline McNair, W5 Associate Produer
Published Saturday, March 31, 2018 7:00AM EDT
Spend a few hours on some First Nations territories, and you’ll likely see a steady stream of non-Indigenous consumers buying tax-free cigarettes.
First Nations have treaty rights to produce and sell cigarettes tax-free on reserves.
“What we are doing is not criminal,” said Kahnawake Grand Chief Joseph Norton. “What we are doing is our right to do so.”
Under Canadian law, if you don’t have status as an indigenous person, it's illegal to buy untaxed cigarettes.
These cigarettes are subject to provincial and federal taxes that usually represent about 70 per cent of the cost of the product — and for as many as 40 per cent of smokers in some parts of Ontario, the lure of cheap cigarettes is irresistible.
A carton of 200 full taxed cigarettes costs $100 or more most places in Canada. But on-reserve, W5 was able to buy cartons of untaxed cigarettes for as little as $15.
It may seem like a victimless crime, but police say contraband cigarettes are feeding a massive illegal industry run by organized crime groups, and the cost to the taxpayer is in the billions of dollars.
“For tobacco, we hear, just in tax evasion about a billion dollars alone in Ontario a year, and they say two to three billion in Canada per year,” said Chief Superintendent John Sullivan, who heads up the OPP’s Organized Crime Enforcement Bureau.
A 2016 investigation led by the Sûreté du Québec demonstrated just how large organized crime operations in contraband tobacco have gotten.
Dubbed ‘Project Mygale,’ the nearly two-year-long operation tracked raw tobacco that was purchased in the United States, smuggled into Canada at three separate border crossings, and turned into cigarettes at manufacturing plants on First Nations reserves in Ontario and Quebec.
“It was actually the largest investigation of cross border criminality we’ve ever made between Canada and the United States,” said Lieut. Patrick Condon.
Condon explained that the investigation identified 158 truckloads of raw tobacco smuggled into Canada. And the profits made by organized crime were enormous.
“You buy full trucks in the United States for about $80,000 U.S., and then if you’re able to smuggle it to Canada, you can sell it back for $300,000. That’s one truck,” said Condon. “The evidence shows that in two years they made more than $30 million in profit.”
W5 spoke to a trucker who’s been smuggling tobacco from North Carolina into Canada for the past 15 years.
“You know, they’re dangerous people,” said the man who W5 agreed to identify only as “Tony”, as he feared repercussions.
“Your heart’s pounding in your chest. It’s,’Is this, am I gonna make this load or am I gonna get shot in the process and thrown in the back of the trailer and dumped in a, in a landfill somewhere?’”
Tony estimates he drove up to a thousand 35,000-pound loads of raw tobacco across the border, and believes it all went to the black market.
“The size of this business is unbelievable. It’s like a hungry machine, it never stops.”
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