A convenience store owners’ advocacy group is calling on Canada’s next government to lower taxes, strengthen penalties, and improve law enforcement to combat the booming illicit trade of tobacco products.
Anne Kothawala, the president and CEO of the Convenience Industry Council of Canada, warned that if nothing is done about organized crime in the tobacco market, more and more convenience stores will be forced to close across the country.
Speaking at a conference on preventing illicit online trade hosted by tobacco distributors Rothmans, Benson & Hedges, Kothawala told True North that the success of convenience stores should be an issue every politician cares about, given their presence in every federal riding.
“I think part of the challenge for Canadians is that they don’t actually realize the extent to which they’re actually funding organized crime when they go ahead and purchase contraband products,” she said. “Because in some cases, they don’t actually know that it’s contraband.”
Any tobacco product on which neither provincial nor federal taxes have been paid is considered contraband. Duty-paid tobacco is clearly marked with government seals. According to Kothawala, many Canadians don’t even realize that buying unmarked tobacco products from a reserve as a non-indigenous status individual is considered a crime.
“This is a severe problem that has a real ripple effect. And by that, I mean specifically for convenience stores,” Kothawala told True North. “Convenience stores have been closing at a pretty rapid rate, and one of the big factors for that is that they are essentially competing with criminals, and that’s not sustainable.”
She said that when convenience stores close, it has a huge impact on communities right across the country.
According to Kothawala, organized crime traffics contraband tobacco as it has a profit margin eight times that of cocaine. If criminals get caught trafficking the off-market tobacco, it’s a “slap on the wrist” or simply “the cost of doing business” when compared to more severe drug trafficking penalties.
Per the federal Excise Act, offenders can be fined a minimum of $1,000 and a maximum of $1 million or up to five years imprisonment for the crime of tobacco trafficking. Each province may apply its own penalties. Kothawala wants harsher penalties and increased enforcement against international traffickers to deter bad actors.
Catching online illicit trade often only amounts to a “whack-a-mole” approach from law enforcement as it is difficult to charge retailers, especially if the operation spans multi-national jurisdictions.
“The RCMP budget has not changed in like 15 years. It’s $3 million to deal with contraband, which is a growing problem,” Kothawala said. “So if you don’t invest in it, you’re not gonna, you’re not gonna clamp down on it.”
She called for increased border security as the illicit tobacco trade as many illegal tobacco busts of transport trucks across the border involve other illicit items such as weapons and drugs, including fentanyl.
Kothawala said the next federal government needs to do several things to improve the survival prospects of convenience store owners and combat organized crime, which is cutting into their markets.
She said the government needs to cut tobacco taxes, which drive non-Indigenous status consumers to illegal markets such as Indigenous reserve shops or illegal online distributors. She also wants the winners of the next election to lift the Liberal bans on products which are designed to get people off of nicotine in a less harmful way than smoking, such as nicotine pouches.
Kothawala said that despite the claim that the products on shelves could harm kids, the ban only serves to push Canadians looking for these non-smoke tobacco products online or to other black market means.
“Frankly, it’s our reputation as an industry, so we have to make sure that we have a strong track record of checking ID, and we do,” Kothawala said. “If you’re an adult smoker and you’re looking to quit, why can’t you go into a convenience store to find a reduced-risk product that’s going to help you quit?”
Kothawala said that convenience store owners want reduced tobacco product taxes, heightened interprovincial supply chain vetting and collaboration with shippers such as Canada Post to prevent illicit tobacco deliveries.
“There is a direct correlation every time governments increase taxes in the legal market, the illegal market grows,” she said. “You don’t need to be an economist to figure it out.”
She said the next federal government should examine ways to make things more affordable, especially given threats of tariffs and an inflationary economy.
“All Canadian’s kind of basic goods are increasing in terms of cost,” she said. “So they’re going to turn to the illicit markets because we’re talking a fraction of the price.”
She said when convenience stores sell fewer and fewer products due to government policies, its no wonder that they are closing their doors as they try to compete with organized crime.