Justice Committee on Dec. 10th, 2013

[The Chair, Conservative, Mike Wallace]

Ladies and gentlemen, let me call to order this meeting number ten of the Standing Committee on Justice and Human Rights, this Tuesday, December 10.

Pursuant to the order of reference of Tuesday, November 5, 2013, Bill C-10, An Act to amend the Criminal Code (trafficking in contraband tobacco) is in front of us today, our last day with witnesses on this.

This morning we have with us the Canadian Cancer Society and Rob Cunningham; from the Non-Smokers' Rights Association we have François Damphousse; and from the Heart and Stroke Foundation of Canada, Manuel Arango.

All three are here to talk to us about Bill C-10, and they've asked for a certain order of speakers, so we'll go with the Heart and Stroke Foundation of Canada first. Thank you, sir, the floor is yours.

[Manuel Arango, Director, Health Policy, Heart and Stroke Foundation of Canada]

Thank you very much, Mr. Chair.

My name is Manuel Arango, and I'm the director of health policy at the Heart and Stroke Foundation.

The foundation has met with many members of this committee recently to discuss how we can improve the regulatory environment for charitable lotteries through the elimination of red tape, something that could save charities millions of dollars per year. This objective is also supported by many other organizations, including the Cancer Society, which of course is represented here today.

Today, I have the pleasure of discussing Bill C-10 with you.

First, some information about the Heart and Stroke Foundation. Our mission is to prevent disease, save lives, and promote recovery. We are a volunteer-based health charity, drawing upon the support of 140,000 volunteers across the country. We strive to improve the health of every Canadian family, every day.

Tobacco use is a key risk factor for heart disease and stroke, increasing the incidence of all major forms of heart disease and stroke. Of the premature deaths caused by smoking-related disease in Canada, heart disease and stroke accounted for almost one-third of these deaths, or almost 11,000 deaths. As such, for the foundation, it is crucial that as a society we do our utmost to reduce tobacco use.

Over the years, the foundation has worked with its partners to advance a variety of tobacco control measures across the country at the federal, provincial, and municipal levels. We support Bill C-10 because eliminating contraband tobacco, which is a source of cheap tobacco, is critical given the role that price plays in tobacco consumption. We believe that Bill C-10, within the framework of a comprehensive tobacco control strategy, will help to reduce smoking consumption in Canada, especially among our youth.

Let me be clear, in Canada today the principal cause of contraband tobacco smuggling is criminality and geographic hubs, not tobacco taxes. We know this because we do not have any significant tobacco contraband in those jurisdictions in Canada where tobacco taxes are high. ln fact, it is the jurisdictions with the lowest taxes—for example, Ontario and Quebec— where we see the highest rates of contraband, so clearly other factors are at play.

The reality is that tobacco taxes are the most effective tool we have to combat the harm caused by tobacco. A large proportion of the reduction in smoking consumption over recent years can be attributed to our tobacco tax policies. ln fact, reducing tobacco taxes would lead directly to increased smoking, death, and disease. Vulnerable populations such as our youth are especially sensitive to tobacco taxes. Preventing smoking among our youth—Canada's future—is important given that once a teenager begins smoking, they typically continue this consumption pattern for at least 20 years. For this reason, nipping the tobacco habit in the bud among youth is critical and tobacco taxes have an important role to play in this regard.

As I mentioned earlier, geographic hubs also play a role in contraband tobacco. An example of the impact of geographic factors is well illustrated through the case of the border post in Cornwall, where simply moving the border post from the middle of Cornwall Island to the foot of the bridge in Cornwall in 2009 made a dramatic difference in tobacco contraband smuggling rates.

Mr. Chair, a number of measures are needed to address tobacco contraband and tobacco consumption in Canada. Deterrence via increased penalties to stop tobacco contraband smuggling is very clearly one of these measures. For this reason the Heart and Stroke Foundation of Canada supports Bill C-10. This bill is clearly a means, within the context of a comprehensive tobacco control strategy, to combat tobacco contraband and tobacco consumption in Canada.

Thank you very much.

[The Chair, Conservative, Mike Wallace]

Thank you for that presentation.

Our next presenter is from the Non-Smokers' Rights Association.

The floor is yours, sir.

[François Damphousse, Director, Quebec Office, Non-Smokers' Rights Association]

Thank you, Mr. Chair, and all the members of the committee for granting me this privilege to offer a few of my own comments on the importance of Bill C-10.

First of all, l would like to say that the Non-Smokers' Rights Association is a national non-profit health organization working for more than 35 years in the development and promotion of effective tobacco control policies, including tobacco taxation, to reduce the death and diseases related to tobacco use.

On the issue at hand, as Manny mentioned, it is important to understand that tobacco taxation is the most valuable policy we have at our disposable to reduce tobacco use, especially amongst kids. That is why efforts such as Bill C-10 are always welcome. They provide more powers to the authorities to contribute further to the decline of the tobacco contraband market.

l was quite surprised to learn recently that only RCMP officers have the authority to make arrests of suspected tobacco smugglers. Although the Quebec Tobacco Tax Act does grant some powers to provincial and municipal police officers to immobilize motor vehicles suspected of carrying contraband, and request a warrant to search them, they cannot make any arrest. It is up to the Quebec revenue department to lay any charges. l believe Ontario provincial and municipal police officers don't even have such authority to enforce their own Tobacco Tax Act.

This will all change with the passage of Bill C-10, because contraband trafficking will finally be recognized as a criminal activity.

Another key issue is the fact that many traffickers arrested by the RCMP and found guilty of tobacco smuggling don't even pay their fines. They just go back to the illicit trade. That raises serious concerns about the deterrent effect of existing sanctions.

By adding jail time, Bill C-10 makes contraband tobacco a more serious offence, as it should be, considering the threat it poses to public health. However, the next challenge will be to convince the provincial and municipal police officers to take full advantage of these new powers under Bill C-10, which is under the Criminal Code. Maybe the next step would be to imitate Quebec and create dedicated teams of investigators focusing uniquely on the fight against the illicit tobacco trade.

Thank you.

[The Chair, Conservative, Mike Wallace]

Thank you for that presentation—short, sweet, and to the point. Thank you very much.

The next and final presenter this morning is the Canadian Cancer Society.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Thank you, Mr. Chair.

My name is Rob Cunningham, lawyer and senior policy analyst with the Canadian Cancer Society.

Thank you for the opportunity to testify before you today.

We support Bill C-10. We urge all parties to support adoption of the bill as soon as possible.

At the outset, let me emphasize the crucial role that higher tobacco taxes play in reducing tobacco use, especially among youth who have less income. There's a vast body of evidence that confirms the obvious: as prices go up, tobacco consumption goes down. Through the clerk, we've provided to the committee for its review extensive studies, reports, and other evidence to this effect, including a 2001 evidentiary compilation—I am showing you the first volume here—as well as a 2011 evidentiary review.

Contraband undermines the public health and public revenue benefits of higher tobacco taxes. Contraband may provide direct access to lower-priced product and may be a concern impeding governments from increasing tobacco taxes.

The cause of contraband as we have it in Canada today is not high tobacco tax rates, but rather proximity to the source of supply: the illegal factories on a handful of territories in or near Ontario and Quebec. This is key to the problem.

In the white binder that has been distributed to you, you will see in tab 1 a tax map, and you can see the comparative tobacco tax rates for provinces and territories in Canada. In western Canada, tobacco taxes are far higher than in Ontario and Quebec, but in Ontario and Quebec, contraband is far higher than in the west. This demonstrates that the cause of contraband in Canada today is not higher tobacco taxes but proximity to illegal sources of supply, as we see in Ontario and Quebec. We can have high tobacco taxes with low contraband, as has been sustained in western Canada.

The tobacco industry acknowledges that contraband has decreased substantially. I invite you to turn to tab 2 in the binder. In a presentation from British American Tobacco, they indicate that there was an increase in contraband through to 2008—33%—but by 2010, it declined to 19%. There are further indications of decline since then. If you turn to the next page, you will see that Philip Morris has some data through to 2011, with very significant declines in contraband.

Bill C-10 will be beneficial to efforts to combat contraband. The bill is reasonable and justifiable.

Bill C-10 is in fact necessary and essential as a mechanism to help drive contraband volumes down further and to do so on a sustained basis. It will provide a prosecutorial option for stronger penalties. Right now, fines are too often simply treated as a cost of doing business, and fines that are imposed are far too frequently ignored and never paid. There needs to be an adequate deterrent available, and Bill C-10 will provide a new optional mechanism. The penalties in existing excise legislation are not doing the job. The bill will also provide new authority to provincial and municipal police officers.

There are 37,000 Canadians who die each year because of the tobacco epidemic, 47 times the total number of homicides, which in 2011 was 598. By reducing contraband and sustaining further tobacco tax increases, lives will be saved and fewer kids will be addicted.

We must recognize that contraband is, in part, an aboriginal health issue. One study found that smoking prevalence among on-reserve first nations was a shocking 59%, compared to the Canadian average, which is now 16%. Illegal factories and other contraband sources provide aboriginal kids and adults with direct access to cheap cigarettes with no taxes paid.

Contraband must be tackled. At the same time, we must not allow the tobacco industry and the associations they fund to use contraband as a public relations tactic to oppose other much-needed tobacco control measures.

Beyond Bill C-10, further federal action measures on tobacco contraband should be implemented.

First, while the RCMP has done considerable good work, we believe that the RCMP should pay more attention to blocking the supply of raw materials, such as leaf tobacco, cigarette paper, and cigarette filters, intended for illegal reserves. We urge the RCMP to gather intelligence and then intercept, off reserve, these shipments that are illegally aiding and abetting the unlicensed factories. This is key in terms of an effective strategy to deal with illegal factories located in Canada.

Second, there is no doubt that relocating the Cornwall border post in 2009 to the bottom of the bridge in Cornwall reduced contraband. It became a choke point for previous smuggling routes from the U.S. side of Akwesasne. The government now intends to move the border post to Massena, New York. We suggest a modification. Instead of simply moving, a better approach would be a two-part border post, with the primary checkpoint in Massena and a secondary checkpoint at the current location in Cornwall. This is similar to arriving in Canada after an international flight, when in the airport there is a two-part check system.

Third, the federal government needs to persuade the U.S. government to shut down the illegal factories on the U.S. side of Akwesasne.

Fourth, the Canadian Cancer Society recommends that Canada sign the Protocol to Eliminate Illicit Trade in Tobacco, an international agreement under the WHO Framework Convention on Tobacco Control.

We need a comprehensive strategy to combat contraband, and we need a comprehensive strategy to reduce tobacco use.

In closing, we reiterate our support for the bill. We look forward to your questions.

Merci.

[The Chair, Conservative, Mike Wallace]

Thank you for that presentation.

We will go to questions now.

Our first questioner, for the New Democratic Party, is Madame Boivin.

[Françoise Boivin, NDP, Gatineau, QC]

Thank you, Mr. Chair.

I would like to thank the three witnesses for being here this morning to help us as we consider Bill C-10.

I appreciate that all three of you support this bill. In fact, I would be surprised if you didn't. I am convinced that Bill C-10 is not an end in itself for you and your organizations.

It's not an end to the problem of combatting tobacco use because it's more the name of the game of your associations, I'm pretty sure.

The headline this morning on my local newspaper, Le Droit, read “Illegal Cigarette Butts by the Ton”. The Canadian Convenience Stores Association commissioned a study, and tons of cigarette butts were collected at the Rideau Carleton Raceway. They found that 46.6% were from contraband cigarettes. That shows us just how much of a concern it is.

We have heard from a number of witnesses, and I still don't know how we can solve this problem, strictly from the perspective of contraband. Some people say that if we raise taxes, there would automatically be more contraband. Should we lower taxes to ensure that there is no contraband? But then cigarette use would increase.

Mr. Cunningham, I am pleased that you made other suggestions to indicate that Bill C-10 is not an end in itself. Some witnesses told us that there was less contraband. I would like to hear what you have to say about that. This aspect is important and needs to be studied. When we analyze the methods that the current and previous governments have used, it would help us determine whether Bill C-10 is fine in itself.

My question is for all three of you. Do you agree that there is less contraband, or do you think there is more? Please give us your thoughts.

I'll start with Monsieur Damphousse.

[François Damphousse]

The amount of contraband has very clearly gone down. Even the tobacco companies acknowledge that internally. However, they have started a public relations campaign so that the government mainly draws attention to contraband and nothing else. We aren't saying the problem has been eliminated; the problem still exists. It's impossible to know directly how big the contraband market is because contraband cigarette manufacturers obviously don't provide that information to the authorities. In the 1990s, the three big tobacco product manufacturers acknowledged their guilt and said that they were feeding the contraband market.

That said, it is important to look at the indirect indicators. Take the Government of Quebec's last budget. Its revenues have increased considerably since 2008. With respect to projected revenue from tobacco taxes, the losses have decreased significantly. That clearly means that there has been a shift from the contraband market to the legal market. What happened? The situation can be attributed to the measures taken by the federal government and the governments of Quebec and Ontario.

As Mr. Cunningham said, it is a comprehensive approach that requires a number of measures. I gave a list of all the measures that were put in place in the 2000s by the governments of Quebec and Ontario alone. It's a long list and the measures are working.

[Françoise Boivin, NDP, Gatineau, QC]

Did you submit that document to the committee?

[François Damphousse]

I can, but it is in French; I don't have an English version.

[Françoise Boivin, NDP, Gatineau, QC]

We could have it translated later. The information would be extremely interesting and would let us see all the steps that have been taken. Bill C-10 is part of a whole.

[François Damphousse]

Perfect. I will table it.

I don't know if you have read the report by the Quebec government's advisory committee on the economy and public finances. The committee held public hearings on contraband and issued a report with all the steps take by the Quebec government. It also contains recommendations on another series of steps that the government plans to take in the coming years. I could table that document, as well.

The problem is that taxes are low. You said that if taxes were increased, there would be more contraband, but that's not true. Taxes are much higher in other provinces. There is practically no contraband in Alberta. The problem is the proximity to first nations reserves and the difficulty in intervening to resolve the problem of illegal manufacturers. One of the most important things is to control the inputs. The Government of Ontario will control tobacco farming, but not until January 2015. Cigarette filters and papers can also be controlled, but that hasn't been done yet. We think it is an essential measure that should be put in place.

[Françoise Boivin, NDP, Gatineau, QC]

Some band chiefs were here last week. Tobacco is very important to them; it is part of their culture.

I see you rolling your eyes. In any event, for someone who is aware of the issue, do you think there has been enough discussion between the various police forces and the band councils?

[François Damphousse]

There have been negotiations on sharing income from tobacco tax. The first nations quickly understood that if taxes are charged on their tobacco products, sales would simply disappear.

Yes, tobacco may be part of their culture, but what you probably mean is the traditional use of tobacco, and not the commercial use, or cigarette sales.

I blame tobacco manufacturers for fueling greed in first nations by supplying them with products in the 1990s. Manufacturers succeeded when taxes were lowered in 1994, and they stopped supplying the contraband networks. Aboriginals understood that it was very easy to make cigarettes and that it costs almost nothing. They bought equipment to manufacture contraband cigarettes and started building factories on their reserves. It was then very simple to get them on the legal market.

[Françoise Boivin, NDP, Gatineau, QC]

Thank you.

[The Chair, Conservative, Mike Wallace]

Thank you for those questions and answers. They were very good.

From the Conservative Party, Mr. Dechert.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Gentlemen, thank you for sharing your expertise with us this morning.

I wanted to start with the Canadian Cancer Society.

There seems to be some confusion about whether the importation of contraband tobacco is going up or down in Canada. The RCMP seizures in recent years appear to be down. But last week, when we were meeting with a representative of the Canada Border Services Agency, he actually pointed out that their seizures for the last three years were 35,000 kilograms in 2011, 148,000 kilograms in 2012, and 192,000 kilograms in 2013. Either they're getting a lot better at intercepting the inflow of this contraband tobacco or there is more of it coming in.

Do either of you have a view? Can you clarify that point for us.

[Rob Cunningham]

Sure.

I think possibly those figures from the CBSA just refer to fine-cut tobacco, they don't include cigarettes.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

That's right.

[Rob Cunningham]

I think the news for cigarettes is much more encouraging—

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Okay.

[Rob Cunningham]

—in terms of the trend in seizures.

If you add up the RCMP and CBSA seizures together, the news is far more encouraging. Of course, seizures are only one indication. It is not necessarily representative of contraband. The police are getting better at what they're doing because of the experience and more tools available.

But if we look at all the other indications, including the industry's own studies, including tax-paid sales going up while smoking problems continue to go down, contraband is going down in the aggregate, which is very encouraging. But, still, it's a problem that needs attention, including by this bill.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Right.

So police enforcement is improving things and border security is improving things?

[Rob Cunningham]

Yes, including other measures implemented by the federal government and the Ontario and Quebec governments.