Commission on the Reform of Ontario's Public Services

Chapter 18: Revenue Integrity
The tobacco tax is a key component of Ontario’s smoke-free strategy. Since 2003, a number
of policy and enforcement tools in both the Tobacco Tax Act and the Smoke-Free Ontario Act,
including tobacco tax rate increases, have helped to reduce tobacco consumption by over
20 per cent.
However, in recent years, tobacco consumption has “flatlined” after more than a decade of
decline in smoking rates. The availability of cheap illegal tobacco products makes it easier for
youth to start smoking and removes an incentive for existing smokers to quit. Illegal tobacco
supplies have also adversely affected provincial revenues. In a 2008 report, the Auditor
General estimated the loss of tobacco tax revenue for fiscal 2006–07 as being in the range
of $500 million.
Improved enforcement efforts, especially those over the past three years, have generated
results. Between Apr. 1, 2008 and Sept. 30, 2011, Ontario has seized more than 172 million
illegal cigarettes. In 2010–11, provincial tobacco tax revenue increased by $77 million over the
previous fiscal year to $1.16 billion.
On June 1, 2011, the Ontario legislature approved Bill 186 — Supporting Smoke-Free Ontario
by Reducing Contraband Tobacco Act — with all-party support. Bill 186 provides the
government with important new tools to enhance enforcement while also providing legislative
authority to enter into agreements with First Nations communities related to administration and
enforcement of the Tobacco Tax Act on-reserve.
Recommendation 18-28: Further develop and implement results-focused strategies to deter
illegal tobacco, including enforcing existing laws and developing new partnerships and
legislative and regulatory tools.
These strategies could involve:
� Discussions with First Nations communities to jointly improve the regulation of tobacco
activities on reserves;
� Clear joint actions with the federal government to better align the regulation of tobacco in
Ontario and close loopholes;
� Working with key partners including law enforcement, First Nations and other governments
(e.g., Quebec, the U.S. federal government and New York State) to co-ordinate actions;
and
� Launching an education and awareness strategy to increase public awareness and
understanding of contraband tobacco, including the consequences of its use for Ontarians
and their communities.
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