A JTI-Macdonald Corp. Initiative. (It’s always best to see both sides.)
(It’s always best to see both sides.) A JTI-Macdonald Corp. Initiative.

What’s the real cost of plain packaging?



The introduction of a plain packaging policy is likely to see government tax revenues fall by at least $330 million. It is also likely to see criminal activity rise. Here’s why.

The plain packaging consultation document that was released in the summer by the federal government isn’t clear on the cost to taxpayers. Even with 81% of Canadians1 believing that the estimated costs should be stated, a figure has yet to be released.

Looking at the evidence from Australia, where plain packaging has already been introduced, illegal sales rose by 21%2. This would equate to a loss of approximately $330 million in tax revenues – on top of the already $1.6 billion that is already being lost to illegal tobacco in Canada – if the same were to occur here.

cost

The 2015 KPMG report into illicit tobacco in Australia3 has shown that the share of illicit tobacco has now grown to approximately 14% of the total tobacco market in Australia, costing an estimated $1.49 billion in unpaid excise.
In Canada, illegal tobacco accounts for almost 20% of the tobacco market – that means that one in five cigarettes sold is illegal. Plain packaging will make the problem worse.

The role of criminal gangs

In 2011, the Royal Canadian Mounted Police took their evidence to the Canadian parliament4, which showed that 175 criminal gangs use illegal tobacco proceeds to fund their activity.

Plain packaging effectively hands these gangs an easy-to-copy template, whereas current packaging is harder to produce due to the many trademarked variations. Making it easier for criminals to counterfeit will be a “boon to criminals”, as Thomas Lesnak, a former agent in the US Department of State and the US Bureau of Alcohol, Tobacco, Firearms & Explosives, wrote in the Toronto Sun5 in response to March’s largest tobacco smuggling bust.

Criminals don’t care who buys their products, which makes it easier for tobacco products to fall into the hands of minors – and goes against one of the specific goals the federal government says will be met by its plain packaging policy.

The RCMP already has its own illegal tobacco task force, which was set up in 2008. In its first three years of operation, over 56 organized crime groups were disrupted, and over 3.2 million cartons and unmarked bags of illegal tobacco were seized6.

Plain packaging could have a detrimental effect on Canadians’ lives in two ways: by lowering tax revenues and increasing the burden on taxpayers, and by unwittingly making illegal sales easier and more profitable. Does that seem right to you? It’s time the government was clear on the real cost of their plain packaging policy.

Tell the government what you think by emailing your MP.

1 A Forum Research poll of 2,000 Canadians in August 2016.

2 KPMG. (2013). Illicit Tobacco in Australia. KPMG LLP, p28. Available at:
http://www.pmi.com/eng/media_center/documents/kpmg%20report%20on%20illicit%20trade%20australia.pdf Retrieved 19 July 2016

3 KPMG. (2015). Illicit Tobacco in Australia. KPMG LLP, p7. Available at:
Click to view Retrieved 19 July 2016

4 Oliver, Joe, Chief Supt. 2010. Testimony before the House of Commons Committee on Public Security and National Security. 27 April. Available at Click to view Last accessed: 5 August 2016

5 Lesnak, T. (2016). Plain tobacco packaging a boon to criminals. Available at: Click to view Last accessed 10 August 2016

6 Royal Canadian Mounted Police. (2011). Contraband Tobacco Injects Criminal Activity Into Our Communities. Available at: Click to view Retrieved 10 August 2016

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