Thank you Mr. Chairman and members of the committee. My name is Rob Cunningham. I am a lawyer and a senior policy analyst for the Canadian Cancer Society.
On behalf of the Canadian Cancer Society, thank you for the opportunity to testify today.
Our single most important strategy to reduce tobacco consumption is higher taxes. The very high levels of contraband that we find in Canada today are undermining the success of that strategy. Teenagers are particularly price-sensitive. The high levels of contraband are a problem for not only public health but also public revenue; there's easily more than $1 billion lost by federal and provincial governments. It's also a problem of public security, given the nature of the problem.
My comments will refer specifically to clauses 50 to 69 of the bill, which we support and urge all members of the committee to endorse. We would like to endorse what was in the 2008 budget, in terms of contraband prevention measures, first, to prohibit the importation or possession of tobacco manufacturing equipment, except for those with a valid tobacco manufacture licence. In the absence of this provision, there is inadequate control of the ability to make cigarettes.
Second, we endorse making explicit the authority of the Minister of National Revenue to deny or revoke a tobacco manufacturer's licence where inspectors' access to the premises is impeded. We know this is currently a problem.
And we also support changing the way roll-your-own tobacco is taxed, to facilitate implementation of the government's forthcoming sophisticated tax stamping system. It is a positive measure that we support.
Another measure in the bill and the budget is to close a loophole for a product category called “tobacco sticks”, which are taxed at a much lower rate than cigarettes. Nine out of ten provinces have closed this loophole and the market share has fallen to less than 1%. It's a positive measure to prevent problems in the future.
I'd like to take the occasion to acknowledge and support the announcement of Public Safety Minister Stockwell Day last week with respect to moving forward on enforcement as it relates to tobacco contraband. There's a very serious recognition by the government of the magnitude of the problem. There's a political commitment to move forward. Minister Day recognized this is one step in the process and that more measures in the future will be considered, and we agree there are other measures that would contribute to having an impact as part of a comprehensive strategy.
If I could invite members of the committee to turn to the handout, on the final page is a graph comparing provincial tobacco tax rates in Canada. We see that Ontario and Quebec have the lowest tobacco tax rates, yet they have the highest contraband levels by far. This helps to illustrate that the problem of contraband today in Canada is not one of higher taxes or of demand, but of supply. The key to success is eliminating the sources of supply. We know where those are. The RCMP was very specific about that in the report it released last week on illegal operations on the U.S. side of Akwesasne in New York State near Cornwall, Kahnawake near Montreal, Tyendinaga near Belleville, and Six Nations near Brantford. And there are illicit distribution channels off reserve in various places, particularly in Ontario and Quebec.
What additional measures could assist here? First, to persuade the U.S. government of the importance of shutting down the illegal operations on the U.S. side of Akwesasne. It is a national security threat to both countries. The Canadian government is losing revenue. By far it is the most important source of contraband entering Canada, and we would expect that the U.S. government would ask Canada to act if the reverse were occurring and the U.S. market were being flooded with illegal cigarettes from Canada.
Second, prohibit the supply of raw materials to unlicensed manufacturers, not only leaf tobacco but also cigarette papers, filters, and packaging. We need to choke off illegal production even before we get to the factory.
Third, establish a minimum bond of $5 million to have a tobacco manufacturers licence. Right now, believe it or not, it's possible to get a federal manufacturing licence for as little as $5,000—which is a problem. If we had a meaningful bond, we could have the financial leverage to encourage compliance, and if there's a failure to comply, that bond could be forfeited in whole or in part.
Fourth, have a tracking and tracing system to build on the new tax stamping system that's coming to monitor shipments and identify the point of illegal diversion.
Fifth, and finally, have better promotion of the first nations tobacco tax opportunity that currently exists because of the 2006 budget. There is a very low level of awareness of this, but if we could promote it more, first nations could implement a tobacco tax equal to provincial tobacco taxes. They must have an agreement, an arrangement, with the province in which they're located, but this would assist them.
Contraband is a population-wide public health problem for aboriginal and non-aboriginal kids, and aboriginal and non-aboriginal populations. There's a very high smoking rate among the aboriginal population. It's caused in part by long-standing access to cheap cigarettes, including very cheap contraband cigarettes.
Thank you for your time. I look forward to any questions you may have.