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Cigarette Smuggling: Information on Interstate and U.S.-Canadian Activity

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Report Type Reports and Testimonies
Report Date May 4, 1998
Report No. T-RCED-98-182
Subject
Summary:

Smuggling cigarettes from low- to high-tax states, which was prominent in the 1970s, may be a reemerging problem because a number of states have sharply increased cigarette taxes while low-tax states have not. Recent estimates suggest that smuggling has cost states hundreds of millions of dollars in tax revenues each year. In addition, international smuggling has occurred recently between the United States and Canada. According to the Canadian government, sharp increases in Canadian cigarette taxes in the late 1980s and early 1990s led to large-scale smuggling between the United States and Canada, almost all of it conducted by organized crime. Violence increased, merchants suffered, and--in one year alone--Canada and its provinces lost more than $2 billion (in Canadian dollars) in tax revenues. Canada sharply reduced federal and provincial cigarette taxes in 1994 and increased its enforcement efforts. Since then, smuggling has declined considerably.

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