Ontario's Billion-Dollar War on Contraband Tobacco

TORONTO, ON – November 26, 2025

The Government of Ontario has drawn a new line in the sand against organized crime with the introduction of its Keeping Criminals Behind Bars Act, 2025. While the legislation’s title suggests a focus on bail reform and incarceration, a critical component of the bill takes aim at a pervasive and corrosive force in the province: the multi-billion-dollar contraband tobacco trade. This initiative moves the conversation beyond simple tax evasion, reframing the illicit cigarette market as a direct threat to public safety and a significant drain on funds meant for essential community services like healthcare and education.

By seeking to expand enforcement capacity under the province's Tobacco Tax Act, the government is acknowledging a grim reality: the corner store baggie of cheap cigarettes is often the final link in a criminal chain that fuels violence and undermines public health initiatives across Canada. The move has been lauded by industry players and law enforcement as a necessary escalation in a fight that has, until now, felt like a losing battle.

The Shadow Economy's Threat to Public Safety

At the heart of the government's renewed focus is the undeniable link between contraband tobacco and sophisticated criminal enterprises. The Royal Canadian Mounted Police (RCMP) estimates that as many as 175 organized crime groups are involved in Canada's illicit tobacco market. For these syndicates, contraband is not a side hustle; it is a core business with profit margins that can reportedly reach 400%, far exceeding those of narcotics like cocaine.

These profits provide the capital for a host of other dangerous activities, including firearms smuggling, human trafficking, and the drug trade. This connection was thrown into sharp relief earlier this year with the OPP's Project PANDA, a major operation that dismantled a non-Indigenous criminal network operating on Six Nations of the Grand River Territory. The bust resulted in the seizure of over 25,000 kilograms of contraband tobacco alongside 15 firearms, illustrating the direct pipeline from illegal cigarettes to community violence.

The new legislation aims to disrupt this pipeline by drastically increasing the number of officers eligible to enforce the Tobacco Tax Act. This supports the specialized work already being done by the OPP's Contraband Tobacco Enforcement Team (CTET) and investigators within the Ministry of Finance. "This sends a clear message: protecting Ontario's communities and our members comes first," stated one law enforcement official, who welcomed any measures that help hold offenders accountable.

A Billion-Dollar Hole in Public Coffers

While the threat to public safety is acute, the economic damage is staggering. A landmark report by EY Canada paints a stark picture of the fiscal crisis fueled by the illicit trade. The report estimates that contraband tobacco accounts for a shocking 39% to 50% of all tobacco sales in Ontario. This translates into a colossal loss of tax revenue for the province, valued between $990 million and $1.7 billion from 2019 to 2022 alone.

This is not merely an abstract number on a government ledger. That lost revenue represents funds that would otherwise be invested in hospitals, schools, infrastructure, and mental health services—the very pillars of a healthy community. As the healthcare system grapples with post-pandemic pressures and growing demand, the diversion of over a billion dollars into the hands of criminals represents a critical blow to provincial resources. The fight against contraband tobacco is, therefore, intrinsically a fight to fund the services that keep Ontarians healthy and safe.

The Ministry of Finance, which has conducted significant seizures of its own—including millions of unmarked cigarettes in recent months—is a key partner in this battle. By empowering a wider range of officers to inspect, seize, and lay charges, the new Act provides much-needed reinforcement, turning up the pressure on the retail and distribution networks that sustain this black market.

A Provincial Fight Against a National Problem

Despite Ontario’s robust new stance, stakeholders are quick to point out that this is not a problem the province can solve alone. The contraband tobacco trade is a fluid, cross-country network. Data reveals that in 2023, illicit tobacco held a 29% market share in Alberta, 45% in Manitoba, and a staggering 52% in New Brunswick. Organized crime does not respect provincial borders, making a patchwork of enforcement strategies inherently vulnerable.

This reality has prompted calls for a coordinated national strategy. Rothmans, Benson & Hedges, a major tobacco firm, has been a vocal advocate for federal leadership. "With this announcement, the Government of Ontario is making a meaningful commitment to curb the growth of the dangerous contraband tobacco trade," said Danny Fournier, the company’s Senior Manager of Illicit Trade Prevention. He stressed, however, that the issue requires a broader, unified approach from governments across Canada.

This sentiment is echoed by groups like the National Coalition Against Contraband Tobacco (NCACT) and other industry competitors, who argue that a lack of federal leadership has created a vacuum. While provinces like Quebec have seen some success in driving down their contraband rates through concerted action, the national picture remains fragmented. Critics point to jurisdictional complexities, including the exploitation of some First Nations reserves by criminal gangs for manufacturing and distribution, as a challenge that requires federal-provincial collaboration to resolve respectfully and effectively.

The Unseen Health and Community Costs

Beyond the dramatic headlines of police raids and billion-dollar losses lies a more insidious community impact. The widespread availability of cheap, unregulated tobacco directly undermines decades of public health efforts. Health Canada's national strategy aims to reduce tobacco use to less than 5% by 2035, a goal that becomes exponentially harder to achieve when untaxed cigarettes are sold for a fraction of the legal price.

This low-cost supply provides an easy entry point for young people to start smoking and creates a significant barrier for adults trying to quit. The health consequences—cancer, heart disease, and respiratory illnesses—place a heavy, long-term burden on the healthcare system, a cost ultimately borne by all taxpayers. The very tax revenue intended to fund cessation programs and public health campaigns is instead fueling the criminal enterprises that perpetuate the problem.

Ultimately, the 'Keeping Criminals Behind Bars Act' is more than just a piece of justice-sector legislation. It is an acknowledgment that the economic, criminal, and health impacts of contraband tobacco are deeply intertwined. While Ontario's heightened enforcement is a crucial step forward, it also serves as a powerful reminder that building healthier communities requires a relentless and coordinated effort to dismantle the shadow economies that prey on them.