Cigarette Smuggling:

Information on Interstate and U.S.-Canadian Activity

T-RCED-98-182: Published: May 4, 1998. Publicly Released: May 4, 1998.

Additional Materials:

Contact:

Lawrence J. Dyckman
(202) 512-9692
contact@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

GAO discussed its work on cigarette smuggling, focusing on: (1) interstate cigarette smuggling in the United States; and (2) Canada's experience with international smuggling.

GAO noted that: (1) smuggling cigarettes from low- to high-tax states, or interstate smuggling, prominent in the 1970s, may now be a reemerging problem; (2) such activity is likely to occur when the differences in cigarette taxes across the states are significant enough to make it profitable; (3) recently, many states have opted to sharply increase their cigarette taxes; (4) yet most low-tax states have not; (5) as a result, recent studies suggest that the level of interstate smuggling activity may now be increasing; (6) in fact, recent estimates suggest that smuggling is responsible for states collectively losing hundreds of millions of dollars in annual tax revenues; (7) in addition, recent experiences demonstrate that international smuggling can occur when cigarette tax differentials are substantial; (8) international smuggling has occurred recently between Canada and the United States; (9) according to the Canadian government, sharp increases in Canadian federal and provincial cigarette taxes in the late 1980s and early 1990s led to large-scale smuggling between the United States and Canada conducted almost entirely by organized crime; (10) violence increased, merchants suffered, and in one year alone, Canada and its provinces lost over $2 billion (in Canadian dollars) in tax revenues; (11) Canada responded in 1994 by sharply reducing federal and provincial cigarette taxes and increasing its enforcement efforts, among other steps; and (12) since then, smuggling has declined considerably.

Jan 14, 2021

Nov 18, 2020

Nov 9, 2020

Oct 19, 2020

Sep 23, 2020

Aug 31, 2020

Jun 29, 2020

Jun 16, 2020

May 1, 2020

Apr 30, 2020

  • tax icon, source: Eyewire

    Priority Open Recommendations:

    Internal Revenue Service
    GAO-20-548PR: Published: Apr 23, 2020. Publicly Released: Apr 30, 2020.

Looking for more? Browse all our products here