Smugglers open fire as cigarette taxes cut

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Cigarette smuggles operating through the Akwesasne Reserve in eastern Ontario opened fire on RCMP officers on the same day Ottawa promised to crack down on tobacco trafficking.

The smugglers fired two warning shots from semi-automatic weapons at an RCMP patrol after the officers turned their lights on a convoy of six snowmobiles creeping across the frozen St. Lawrence River.

The bandits, who were pulling sleighs, fled across the river at Lake St. Francois as the RCMP called Quebec Provincial Police for back-up.

A few minutes later, police recovered 108 cartons of cigarettes worth about $216,000 from a garage in nearby Valleyfield, Que.

No one was hurt in the Feb. 8 incident, which came on the same day Ottawa announced its four-point campaign against tobacco smugglers.

Prime Minister Jean Chretien said Ottawa would double the number of RCMP anti-smuggling agents to 700 officers in an effort to choke the illegal movement of tobacco across the international border.

Ottawa will also increase support from the Canadian Coast Guard and Canadian Forces personnel along the St. Lawrence River and raise the number of Canada Customs officials at border crossings to about 350 officers.

The increase in law enforcement, which is expected to cost about $150 million, is designed to halt the 70 per cent of smuggled cigarettes that move back into Canada through the Akwesasne Reserve at Cornwall, Ontario

"The rule of law will be respected and applied to all citizens," Chretien said. "This is one country which one set of laws that apply to every individual in every community."

But the heavier police presence near reserves has left many Natives feeling edgy.

Grand Chief of the Assembly of First Nations, Ovide Mercredi, said clamping down on smuggling by establishing "no-go zones and having one set of laws for all communities does not recognize the jurisdictions that have to be addressed."

Ottawa should look at addressing "the whole system", and not isolate situations on reserves, said Native Council of Canada president Ron George.

"It's not about smuggling. These people are free traders according to their treaties."

In addition to police reinforcements, the federal government will lower domestic taxes and raise export taxes on cigarettes to curb revenues for smugglers.

The Liberals dropped the federal excise tax on cigarettes by $5 per carton and offered to match provincial cuts of more than $5 to a maximum of $10. Export taxes are also up $8 per carton in the hope of making the cigarettes destined for U.S. markets unprofitable for smuggling.

About 80 per cent of the cigarettes on Canada's black market were originally destined for sale in the U.S. only and are labelled 'not for sale in Canada'.

Kahnawake Mohawk Chief Joe Norton criticized the tax cuts, saying they would increase the number of people buying cheaper cigarettes from reserve dealers. The price

of a carton of cigarettes fell to less than $23 overnight in Quebec.

But Chief Jerry Peltier of the Kanesatake Reserve near Montreal said the drastic tax cuts will help diffuse the tensions that were building on his reserve over possible RCMP raids.

Some of the tobacco-runners from his community will probably be put out of business, Peltier said. But those in the cigarette trade are probably already looking at other business ventures.

Forty per cent of the cigarettes consumed in Canada $12.4 billion-a-year tobacco market are contraband. Smuggling costs Ottawa and the provinces $2 billion in lost tax revenue every year.

In Ontario 35 per cent of all cigarettes purchased are smuggled back from the U.S. and sold for up to $30 less than the legal cost of $48 per carton.

The loss in tax revenue is expected to cost Ottawa $350 million by 1995.

The cost to cigarette manufacturers is also going up. Ottawa will raise the surtax on manufacturers' profits to 30 per cent, up nine per cent from its current level.

The additional $200 million that Ottawa hopes to collect for manufacturers will be used to fund "the largest anti-smoking campaign in Canadian history," Chretien said.

Ottawa plans to make it harder for minors to obtain cigarettes by raising the purchasing age limit from 16 to 18, eliminating the smaller "kiddie packs" and restricting the number of cigarette vending machines.