Health Committee on Feb. 12th, 2018

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Would you say the same for consumers in addition to law enforcers, that it would be difficult for them to differentiate between the two?

[Satinder Chera]

Yes, and this is one of the reasons we say that when you take away brand identifiers, then the only real difference is price. There is virtually no way a law-abiding community store can compete with the black market; 70% of legal tobacco products is taxable, and on top of that you have overhead, wages, and so forth. The illegal market doesn't have to worry about paying taxes.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Mr. Chera, do you know how much tax revenue is lost annually due to the revenue missed on contraband cigarettes?

[Satinder Chera]

One report that I think the Macdonald-Laurier Institute put out had a figure of about $3 billion.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Yes, that makes sense to me. With 29 billion cigarettes sold in 2014, and estimating that that's only 70% of the market, an additional 30% of the market would be $12 billion. At 16.475¢ per cigarette I think that's a lot of money we could have saved with the small business tax changes, wouldn't you say?

Thank you very much for those estimates.

Mr. Luongo, why would you say that the proposed taxes on marijuana are considerably lower than those currently on cigarettes?

[Peter Luongo]

Honestly, I wish I knew. We don't have an official position on it. Our perspective is that taxation should be based on risk, not just the history of why we are where we are today. I think whichever product you're looking at, you should look at taxation based on the risk to the consumer. That's both on nicotine and tobacco products, looking at e-cigarettes versus cigarettes, but it's also across the whole spectrum of consumer products.

[Anne Kothawala]

Could I pick up on that?

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Yes please do, Ms. Kothawala.

[Anne Kothawala]

I think it's an important question because it's precisely what you have from the Prime Minister on down. Several ministers have said that the whole rationale behind ensuring that there's not a huge tax on cannabis when it becomes legal is to avoid growth of the black market. We are asking ourselves why the same logic is not being applied to tobacco.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

I think it's pretty rich for our committee to potentially accuse one of our guests and invitees here today of lying and killing off people when I'm certain we could say the same about alcohol, opioids, or coffee eventually, for that matter.

Following up on that question, Mr. Luongo, do you see contraband tobacco actors moving into the marijuana industry as well? Do you think that as a potential risk in the future?

[Peter Luongo]

I'm not the expert on their business strategy, but it seems pretty logical.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

I would say so.

Mr. Chera, could you comment on that, the potential of contraband tobacco actors eventually moving into the marijuana industry as well?

[Satinder Chera]

I think if the government pursues its approach to ensure that pricing isn't way out of whack with the underground economy, then perhaps they'll avoid that problem. That's essentially the point my colleague made. If they apply that logic to cannabis, then why not apply it to tobacco where we already know we have a thriving contraband market that the RCMP has already talked about, illegal factories in Canada that are pumping the illegal packages? Why not apply that logic to both products going forward?

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

It would seem to me that it would be reasonable for the government to apply the same standards to both industries.

Finally, Mr. Chera, can you explain where profits from contraband cigarettes go, as far as you know?

[Satinder Chera]

They go into the pockets of criminals.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

The pockets of criminals. You would say things such as organized crime, human trafficking, terrorism, perhaps even relating to the first World Trade Center bombing?

[The Chair, Liberal, Bill Casey]

The time is up.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you very much, Mr. Chair.

[Satinder Chera]

I would respond that in our presentation we had a quote from the RCMP that specifically talked about the connection between criminal elements and contraband.

[Stephanie Kusie, Conservative, Calgary Midnapore, AB]

Thank you.

[The Chair, Liberal, Bill Casey]

Thanks very much.

Mr. Ayoub.

[Ramez Ayoub, Liberal, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

Let me summarize Bill S-5.

The Tobacco Act will become the Tobacco and Vaping Products Act. It will include provisions to protect young people from nicotine addiction and tobacco use. It will also give adults access to alternatives to vaping products that could be less harmful. I repeat, an alternative to tobacco use that could be less harmful. Moreover, it will protect the health and safety of Canadians in a variety of ways.

On one side of the table, they are saying they are concerned about the health of Canadians and young people; on the other side, they are talking business. I am concerned. The industry is talking out of both sides of its mouth. They say they are going to top the tobacco industry, but there is obviously a huge credibility problem there.

I need proof for you to convince me, Mr. Luongo, that you want to stop the tobacco industry. I would like to know how much money you are investing in closing your business. I do not think you are making any such investments right now. You should really be investing in addiction treatment or clinics. We are talking about nicotine today, but we could be talking about drug addiction in general.

For your part, our friends from the client service industry, especially convenience stores, you are caught in the middle. You do an excellent job of checking identification for resale, but at the same time you do not want to tell us what financial pressure the industry is placing on your association. I find that troubling because it calls into question your credibility. You should work on that to win my trust. For us as MPs and politicians, credibility and the code of ethics are what matter the most. We are judged and have no leeway, whereas you have a lot.

I would like to return to our young volunteers who have few resources, but who are concerned about public health, as the government is.

What do you like about Bill S-5? What changes would you like to see to improve the health of Canadians, especially youth, and to prevent them from starting to smoke in the future and thereby damage their health?

[Anabel Bergeron]

The Freeze the Industry movement supports Bill S-5 because it would provide for standardized, plain packaging. Packaging is often designed to be stylish. Young adults must be aware of the secondary effects and the consequences of smoking. We have to remember that this age group is very vulnerable to stress and peer pressure. Young people are more vulnerable and more likely to start smoking. In our opinion, if health-related advertising were more influential and the seductive aspect of packaging were eliminated, making it standardized and plain, that would prevent people from starting to smoke.

[Maxime Le]

In the same vein, I would like to elaborate on what my colleague said. Making health-related messages more prominent on cigarette packaging increases the likelihood that young people who are already addicted to nicotine will seek out the appropriate assistance to try to kick their habit.

The changes we would like to see include standardized, plain packaging, which would prevent youth-oriented marketing and branding strategies and would improve the health of young Canadians.

[Anne Kothawala]

Can I jump in? Was it only a question for them, or did you want to hear what we have to say?