Up to one in every two cigarettes sold in Ontario is now illegal. With a $16.9 billion deficit, the province can’t afford to hand its tobacco tax to organized crime; convenience stores call for urgent enforcement reform
TORONTO, ON (NOVEMBER 2, 2026) — Up to one in every two cigarettes sold in Ontario is now illegal, according to the fourth study in EY’s research series on contraband tobacco, prepared for the Convenience Industry Council of Canada (CICC). Contraband cost Ontario up to $1.08 billion in tobacco tax from 2023 to 2025, while illegal sellers took in up to $2.34 billion. The findings land as Ontario projects a $16.9 billion deficit.
“Contraband in Ontario is out of control,” said Anne Kothawala, President and CEO of the CICC. “If the government’s plan is to protect Ontario, it has a billion reasons to focus on fighting this illicit market. Contraband costs us all: the small business that loses the sale, the taxpayers who cover the lost revenue who makes up the shortfall, and the community where the profits fund guns and drugs. Convenience stores check ID, follow the rules and collect the tax. Organized crime does none of that, and right now it’s winning.”
WHAT THE REPORT FOUND
- The illegal market may now be as large as the legal one. Contraband made up an estimated 42% to 53% of Ontario’s cigarette market in 2025, up from 34%–46% in 2023.
- Legal sales have collapsed. Legal cigarette sales in Ontario are down 46% since 2019. A legal carton costs about $160; an illegal one, as little as $35 to $40, delivered to the door, often by Canada Post.
- Ontarians are footing the bill for up to $1 billion in lost taxes. Ontario lost an estimated $690 million to $1.08 billion in tobacco tax from 2023 to 2025: money that could have gone to schools and community safety. Ottawa lost a further $671 million to $1.05 billion in excise duty in Ontario alone.
- Organized crime is cashing in. Illegal sellers in Ontario took in up to $722 million in 2025 alone. According to the RCMP and other law enforcement agencies, proceeds like these are reinvested in fentanyl, firearms and other crime. In Project Panda, cited in the EY report, police seized more than 11 million contraband cigarettes and 15 firearms from a single organized crime operation.
THE STORES THAT FOLLOW THE RULES ARE PAYING THE PRICE
Across Canada, more than 21,200 convenience stores employ over 182,000 people, and an average of 1.5 stores closed every day last year. Every illegal sale is a customer lost to a criminal who pays no tax and checks no ID. Convenience stores pass Health Canada mystery shops with a 99% compliance rate, compared with 43% at specialty vape shops.
CICC CALLS FOR PROVINCIAL ACTION
CICC is asking the Ontario government to:
- Give police the power to act: Let municipal and provincial police investigate contraband tobacco and nicotine offences directly, without prior Ministry of Finance clearance, and remove the “in plain view” search restriction in the Tobacco Tax Act.
- Make penalties bite: Raise fines, adopt administrative monetary penalties like Alberta’s, and let police keep seized proceeds of crime for community safety.
- Shut down the online trade: Crack down on online sellers shipping by Canada Post with no age check, and work with Ottawa to cut off their ads, e-transfers and bank accounts.
- Back the retailers who check ID: Make ID Please (or equivalent) certification mandatory for all retailers selling nicotine products under the Smoke-Free Ontario Act, 2017.
“With roughly 100 busts a year and only 25% resulting in criminal convictions, low penalties and high rewards allow criminal supply chains to operate virtually unchecked. Ontario has the evidence. Now it needs to take swift action,” said Kothawala. “Empower local police, make penalties hurt and follow the money. That’s how you protect Ontario.”
The full EY report is available here.
About the Convenience Industry Council of Canada (CICC)
The Convenience Industry Council of Canada (CICC) is a national, non-profit association representing Canada’s convenience store industry. Convenience retailers operate more than 21,200 stores across Canada, employ more than 182,000 workers, and generate $53.4 billion in annual economic output.
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