New EY report: as organized crime takes over the tobacco market, small businesses that follow the rules and the taxpayers who fund public services are picking up the tab
OTTAWA, ON (NOVEMBER 2, 2026) — Up to one in every two cigarettes sold in Ontario, and nearly one in two in British Columbia, is now illegal, according to a new independent report prepared by EY Canada for the Convenience Industry Council of Canada (CICC).
Over the past three years, contraband cost the two provinces and the federal government an estimated $1.7 billion to $2.75 billion in tax revenue. Over the same period, illegal sellers took in an estimated $1.75 billion to $2.84 billion.
“Contraband costs us all. In Ontario, the illicit market may now be as large as the legal one, and every sale a law-abiding small business doesn’t make is money taken out of government coffers,” said Anne Kothawala, President and CEO of the CICC. “Convenience store owners follow every rule, check every ID and collect the tax, and they are being undercut by organized crime. This isn’t just about tobacco anymore; we are now seeing busts that include vapes and nicotine pouches. It’s out of control, and
governments must act now instead of handing a competitive advantage to organized crime.”
WHAT THE REPORT FOUND
- Up to half the market is illegal. In Ontario, up to 1 in every 2 cigarettes is now bought illegally. In B.C., it is nearly 1 in 2.
- B.C.’s illegal market has grown every year. It rose from 21%–36% of the market in 2023 to 25%–39% in 2024 and 33%–46% in 2025.
- Ontario’s illegal market may now be as large as its legal one. Contraband made up 42%–53% of the market in 2025, up from 34%–46% in 2023.
- Legal sales are collapsing. Since 2019, legal, tax-paid cigarette sales have fallen 46% in Ontario and 59% in B.C.
- Price is driving it. A legal carton costs about $160 in Ontario and $193 in B.C. Illegal operators and online sellers offer cartons for as little as $35 to $40.
EVERY ILLEGAL SALE IS TAX THE GOVERNMENT NEVER RECEIVES
From 2023 to 2025:
- Provinces: B.C. and Ontario lost an estimated $901 million to $1.48 billion in provincial tobacco tax combined: up to $1.08 billion in Ontario and up to $400 million in B.C.
- Ottawa: The federal government lost a further $788 million to $1.27 billion in excise duty on cigarettes in the two provinces.
- Together: $1.7 billion to $2.75 billion, including up to $1.05 billion in 2024 alone.
- Organized crime cashed in: Illegal sellers took in an estimated $567 million to $894 million in 2025 alone. According to the RCMP and other law enforcement agencies, proceeds like these are reinvested in organized crime, funding drug trafficking, including fentanyl, and firearms smuggling in Canadian communities.
SMALL BUSINESSES AND TAXPAYERS ARE PICKING UP THE TAB
Canada’s more than 21,200 convenience stores employ over 182,000 people, and an average of 1.5 stores closed every day last year. Each illegal sale is a customer lost to a criminal who pays no tax, checks no ID and follows no rules. Convenience stores are among the most responsible retailers of agerestricted products in Canada: they pass Health Canada inspections for vaping products with a 99% success rate, compared with 43% at specialty vape shops.
“The federal government has put important tools in place to fight contraband tobacco, from the new Financial Crimes Agency to the National Anti-Fraud Strategy,” said Kothawala. “Now those tools need to be put to work. Give police the resources to do the job, follow the money, and shut down the websites and payment accounts that keep this trade running. Acting now protects public revenue, keeps illegal products away from young people and supports the small businesses that follow the rules.”
CICC CALLS FOR ACTION
To cut off the money behind illegal tobacco, CICC is asking the federal and provincial governments to:
- Put the new Financial Crimes Agency on the case: Give the agency a formal mandate to go after the money behind illegal tobacco and nicotine, and add specific measures to the National Anti-Fraud Strategy to take down illegal vendor websites and online ads.
- Give police the resources to do the job: Substantially increase funding for the RCMP Contraband Tobacco Task Force, whose base budget has been frozen at a paltry $3 million a year since 2008.
- Cut off the online storefronts and the payments: Require search engines and social media platforms to find and block illegal sellers, and require federally regulated banks and payment processors to close their accounts.
- Give adults a legal option behind the counter: Allow licensed convenience stores to sell authorized harm-reduction products, such as nicotine pouches, again. Convenience stores pass more than 99% of audited age-verification checks, so selling these products behind their counters keeps them away from youth and keeps adults out of the unregulated online market.
Contraband Tobacco in British Columbia and Ontario: 2023–2025 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.
Media Inquiries:
Jeff Brownlee, VP Communications & Stakeholder Relations,
(613) 795-7454
[email protected]
