OTTAWA | November 2, 2026

Federal and provincial governments may be losing billions of dollars in tobacco tax revenue because of illegal cigarette sales, according to figures attributed to new EY Canada research commissioned by the Convenience Industry Council of Canada (CICC).

A November 2 report about the research estimates combined losses for the federal government, Ontario and British Columbia of between $1.7 billion and $2.75 billion over three years. The estimates have not been independently confirmed by government revenue agencies, and Eye on Ottawa has not yet obtained the full new EY report to review its methodology.

Ontario tax losses estimated at $1.1 billion

According to the reported findings, illegal cigarettes account for an estimated 42 to 53 per cent of Ontario cigarette sales. The research reportedly places Ontario’s lost tobacco tax revenue at approximately $1.1 billion over the period studied, with an estimated $400 million for British Columbia and $788 million to $1.3 billion in federal revenue.

These are modeled estimates of potential tax revenue, not money recovered by authorities or an official assessment of taxes owed.

Price gap and enforcement concerns

Legal tobacco products carry federal and provincial taxes. The reported research points to a substantial price difference between taxed cigarettes and contraband products as one factor behind illegal sales. Law enforcement agencies have also raised concerns about organized crime’s involvement in illicit tobacco distribution.

The CICC, which represents convenience retailers and commissioned the research, has called for stronger enforcement against illegal tobacco distribution. Its commercial interest in the issue is relevant when evaluating the findings.

Understanding the estimates

Earlier EY research published in 2023 estimated the contraband market using legal sales and smoking-consumption data. That earlier study is useful background, but it does not verify the figures attributed to the November 2026 research.

Source and verification note: The November 2026 figures are attributed to an EY Canada study commissioned by the Convenience Industry Council of Canada, as described in a November 2 news report. Eye on Ottawa has not independently reviewed the new study. Image: AI-generated.