First Nations: Scapegoats for flawed tax policy

More whining from those who want to blame others for the consequences of badly flawed tax policy initiated at the insistence of anti-smoker zealots for the sole purpose of persecuting smokers.

Michel Gadbois is senior vice-president of the Canadian Convenience Stores Association. And, Gadbois believes that tobacco taxes are unjustly punishing law-abiding, taxpaying tobacco retailers, because the punitive sin taxes are driving business away from the members of his association.

He's right, of course; at least in part. But, extortionate sin taxes on tobacco are really intended to punish law-abiding, taxpaying tobacco users . . . smokers, in other words. Unfortunately, convenience store owners and other tobacco retailers have become collateral damage in the anti-smoker crusade to eradicate smokers and all things related to tobacco.

It's no secret that convenience stores, especially the smaller, independently owned corner stores, are highly reliant on sales of cigarettes and other tobacco products to generate adequate levels of income to remain in business. And, as sin taxes on tobacco soar, more and more smokers are turning to unregulated, untaxed product from other sources. In Canada, that means tobacco products manufactured on, or distributed through, First Nations reserves.

According to an article written by Gadbois, and published in the Calgary Herald contraband tobacco sales have “devastated the convenience store industry” forcing more than 2,300 corner stores, mostly in Ontario and Quebec, to close over the last year. In addition, claims Gadbois, illegal sales were the cause of more than $2 billion in lost tax revenue in 2009.

Gadbois warns of a similar fate befalling convenience store operators in Alberta and other provinces if sales of untaxed tobacco products are allowed to continue. “Alberta and the other western provinces will face the same fate if this activity goes unpunished.”

The recent seizure of cigarettes from the Montana First Nations in Alberta is a “step in the right direction”, claims Gadbois, but fails to resolve the issue. More drastic action is required. He seems particularly chagrined that the manufacturer (Rainbow Tobacco) and the band chief of the Montana First Nations have initiated legal action and are seeking redress through the courts for what they consider an illegal seizure by provincial authorities in Alberta.

So, he wants Ottawa and the provinces to declare war on Canada's First Nations. He wants them punished in the mistaken belief that this will stop the flow of contraband and save thousands of convenience stores which rely on “legal” tobacco sales for substantial portions of their income.

Gadbois concludes his whine saying: “Look for leadership among those who recognize the problem and intend to extinguish the contraband trade once and for all.”

Obviously, Gadbois is not among those who “recognize the problem”.

The problem originates, not with the manufacture and sale of untaxed contraband, but with the usurious levels of sin taxes intended to force smokers to give up the habit. Contraband tobacco is merely a response to those punitive levels of taxation.

Canada's First Nations did not create the demand for cheap tobacco; demand was created by government's insistence on treating smokers like cash cows to be milked whenever they needed an unsympathetic source from which to extort additional revenue. The trade in contraband flourishes because smokers, in ever increasing numbers, are fed up with the constant tugging at their teats.

The fact is that the “man in the van” has followed the imposition of excessive sin taxes, meant to punish smokers and control their behaviour, wherever that particular brand of extortion has been introduced. It's a global phenomenon.

It's the glaring disparity between the cost of production and the legal selling price of a pack of smokes (roughly 80% of which is tax in one form or another) which represents the massive profits available to those engaged in the contraband trade. And the greater the disparity, the greater the potential for profit.

A confrontation with Canada's First Nations will not “extinguish the contraband trade once and for all”. With the kind of profits to be made from this government folly, there will always be someone waiting in the wings to take up the slack and reap the rewards inherent in what is a flawed and ill advised public policy.

Canada's First Nations simply make a convenient scapegoat for the problems created by anti-smoker venom.