First Nations and the Contraband Tobacco Crisis – a position

  • Posted on: 27 April 2014
  • By: Allen Small
Regular News

The website calls contraband tobacco a serious problem in Canada. According to the site contraband tobacco funds organized crime, threatens the viability of small businesses, and results in the loss of significant government tax revenue. The issue is made more complex because it involves the First Nations people and their special privileges in law with respect to tobacco.


To understand the issue it might help to look at it from a libertarian perspective.


Libertarians will argue that discrimination in law on the basis of ethnic origin is wrong. Laws within Canada should apply to all people equally, everyone has the same rights; no one should be getting special treatment in law just because their ancestors made some special treaty a very long time ago. Such inequities should have been dealt with back then.


The First Nations people of Canada (including Ontario) have their pre-Confederation rights guaranteed in the 1982 Charter of Rights. These special rights and freedoms go back to the Royal Proclamation of Oct. 7, 1763 according to Section 25 of the Charter. Section 35 of the Charter calls for a constitutional conference where the Prime Minister would meet with First Nation’s representatives if any amendments were to be made to the original deal. This is the unfortunate reality. Of course significant changes have not yet happened and are unlikely in the near future.


What would be significant? Any deal that puts an end to the massive $8 billion plus annual budget of the Federal Ministry of Aboriginal Affairs and Northern Development, or at least cuts it back severely (by the way, Ontario has a Ministry of Aboriginal Affairs too, with a smaller budget). That would mean some sort of an agreement on aboriginal land claims and individual property rights, all of it would finally once and for all set the individual Aboriginal Canadian free of government dependency. It is this unfortunate relationship between the governments of Canada and the First Nations that underlies the desperate poverty of many of aboriginals. Those natives that choose to live in Reserves live in some of the most appalling third world conditions of any Canadian citizen. The inhabitants of many Reserves have unsanitary water supplies, overcrowded and wretched housing conditions, poor diets, preventable disease, high suicide rates, drug and substance abuse, all things that would not be expected from such an expensive and elaborate government program. The Reserves have become fertile ground for corruption and abuse. Aboriginal communities are regularly in the news for some of the most miserable conditions in all of Canada, a stain on how Canada is viewed among nations.


These conditions are without doubt partly caused by the natives themselves, but their situation provides little incentive to make things better. Decades of discrimination and abuse in their own communities, plus the dependency on government entitlements and special privileges have made things even worse. One would think that the First Nations people would have wanted to solve these issues a very long time ago. Yet they persist, which means that someone or some group benefits from the situation and is blocking change.


Similar situations exist in other jurisdictions where Europeans settlers dealt with the aboriginal peoples they encountered during colonial times. So Canada in not unique, but that is no excuse.


Overlying that above mess is the current contraband tobacco issue. In Ontario (and Canada), First Nations people also have special privileges with respect to tobacco:


“Under section 87 of the Indian Act (Canada), the personal property of a registered (Status) Indian situated on a reserve is exempt from taxation.…….Ontario's First Nations Cigarette Allocation System….Under the allocation system, First Nations individuals may buy allocation cigarettes on a reserve, for their exclusive use, that are exempt from Ontario tobacco tax.”


Proportionally huge tax savings on the purchase of tobacco products (and some other things) are afforded to First Nations people on Reserves because taxes are lower or non-existent.


In Ontario, the price of tobacco products to non-natives in the greater community is very high because of federal and provincial taxes. A significant portion of the population still uses tobacco products despite years of education and warnings of the harm done. Many of those people are poor, and the high taxes make tobacco products prohibitively expensive for them. Tobacco is not prohibited, but for low-income tobacco users the price makes it so. Its hard to feel sorry for these people because tobacco use is a nasty and dangerous habit and completely avoidable, but that is human nature.


Its also human nature to satisfy needs and wants by trying to obtain services and products of good quality at the lowest price possible. So the same law that gives First Nations people special tobacco privileges makes it very tempting for non-native tobacco users in the community to take advantage of the cost savings on First Nations Reserves and thus they become lawbreakers.   


Organizations like the Canadian Taxpayers Federation take the position that the sale of tobacco to non-natives is a significant loss of tax revenue for the government. The government has used its coercive legislative powers to create a new law to aid its attempt to socially engineer tobacco use out of existence in Ontario. This is a futile action to be sure, but a new criminal class has been created: low-income non-native purchasers of the First Nations tobacco allocation. Governments, as always are great at creating criminals.


Its should be obvious to anyone that this is a difficult situation, to libertarians its only resolvable if the changes outlined earlier are adopted. If Canada is to have rule of law, the law should apply to everyone equally.   

Allen Small

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