Sin-Tax Failure: The Market in Contraband Tobacco and Public Safety

[An Introduction to the Black Market] [The Size of the Market] [The Engine of Growth] [The Trail of Contraband] [The Native Dimension] [Other Native Involvement in Contraband] [The Warrior’s Society and the Black Market] [Other Dimensions of Violence] [Guns in Canadian Cities] [Organized Crime] [Countering the Black Market] [The High-Price, High-Tax Strategy] [Reducing the Contraband Market]

Chapter Twelve

Reducing the Contraband Market

It is time for the anti-smoking lobby to reassess its tactics. In Canada and the US, smoking is becoming a marginalized social practice. A visit to Germany, France (where tough anti-smoking laws are universally disregarded), Russia or China can highlight the tremendous success that education programs have enjoyed in reducing tobacco consumption in North America. Voluntary persuasion has been working, arm twisting does not and the high-tax, high-price strategy has had an effect — the contraband market.

Cutting Canadian tobacco taxes will badly damage the contraband industry. The Prohibition Era mobsters had diversified before the repeal of the Volstead Act and most survived it. The Warrior’s Society and Silks are only beginning to diversify, and cocaine and fire-arms are more dangerous to carry and not as profitable as tobacco. Yet, if a carton of Canadian cigarettes is reduced to $30, there is still some room for the Contraband market’s cartons at $25. But this price would eliminate many of the smaller independent smugglers. IF Canadian tobacco taxes were to be pegged to American tax-rates and cigarettes sold for $25 per carton, the market for contraband cigarettes would be seriously damaged. Moreover, the Silks are not well organized or efficient businessmen. Without the wide profit margin offered by high taxes, they could not compete.

The Clinton administration in Washington has been musing about boosting federal tax rates by another 3.8 cents (Canadian) per cigarette. If Canada matched the American rate, cartons would sell for $26.50. Yet this still leaves a margin of profit for the Silks and the Warriors unless the Jay Treaty is re-interpreted.

Nothing about the Jay Treaty implied that Natives should have an unfair business advantage, nor are they allowed to re-sell to non-Natives without adding taxes. The tax-free status enjoyed by many Natives applies to goods for personal use only. Tobacco, in any other form but leaf tobacco for ritual purposes should be exempted from the protection of the Jay Treaty. This, in conjunction with matched Canadian-US tax rates, would end the smuggling of cigarettes. It should also shatter the "Nicotocracy" of the Silks and Warriors and allow the suppressed leadership of the Iroquois to re-assert themselves.

Alcohol taxes in Canada should also be pegged to those of the United States. The smuggling of hand-guns can be let alone by Canadian authorities — current laws are restrictive enough and the American gun-control lobby is making impressive strides on its own. These basic measures would deny the access to easy money for organized crime as well, although they are a social ill which society will probably never get rid of. Such measures would not give the Warrior’s Society any direct targets for their impressive arsenal. They will continue to pose a physical threat, but the easy money which supports their control over Akwesasne and other Reserves would be gone. Having already discredited their claim to be protecting native sovereignty, the Warriors would now be purposeless and their ideology would be devoid of substance.

As for the anti-smoking lobby, there is ample scope for a variety of activities and they have a good cause. But, like any campaign in the democratic society, they should restrict their activities to persuasion and education. The contraband market is a result of social-engineering without the consent of their intended subjects and it is time to end the project before it does any more harm.

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John Thompson is President of the Mackenzie Institute which studies political instability and terrorism. He can be reached at: mackenzieinstitute@bellnet.ca