LONDON -- A new licensing system for Ontario tobacco farmers could end up increasing Ontario's thriving illegal cigarette market, a Guelph-based agricultural think tank warns.
"That's the bottom line," said Larry Martin, a senior research fellow at the George Morris Centre.
The new licensing system is being negotiated between the Ontario government and the Ontario Flue-Cured Tobacco Growers' Marketing Board.
The federal government has stipulated such a system has to be in place before it will release $286 million this spring to help farmers leave the tobacco industry.
The federal government has set two other conditions: No tobacco farmer who has received transition money under the program will be allowed to have a licence, and the province must get rid of production controls.
Martin, who has released a paper on the issue, said he's concerned the licensing system may not have any limit on how much a farmer can produce.
One of the few requirements might only be a ban on farmers with tobacco-related criminal convictions from growing the crop, he said.
"Constructing a licensing system with few requirements increases enforcement costs, reduces the effectiveness of enforcement and reduces tax revenues," Martin said in his paper.
A study two years ago on contraband cigarettes in Ontario by the Ontario Tobacco Research unit estimated 30 per cent of cigarette sales in the province were illegal, with a tax loss for the province and federal government of more than $100 million.
Martin said farmers given a licence to grow tobacco should have a contract to sell their crop with a cigarette manufacturer.
"It is clearly in the interest of a licensed manufacturer to reduce contraband. Hence, requiring a contract for a producer licence has a large element of self-policing in it," he said in his report.
Tobacco board chairperson Linda Vandendriessche said the new licensing system being negotiated with the province has yet to be finalized. "There will be checks and balances in the system . . . There will be eligibility requirements, there will be privileges people will have," she said.
