Cigar Weekly

Ontario could avoid a $500 million deficit this year if officials did a better job of collecting tobacco taxes, the provincial auditor general says.

Problems persist with smuggling and sales of illegal cigarettes, and the government should crack down to make sure that purchases of tax-free cigarettes and cigars on First Nations reserves don't exceed their tobacco allocations, Jim McCarter said in his annual report yesterday.

Government computer systems, policies and procedures are "still inadequate" to make sure the proper amount of tobacco, gas and diesel taxes are remitted despite similar shortcomings pointed out in a 2001 audit, McCarter wrote in his 498-page report.

The $500 million figure in lost annual revenue is an estimate based on tax rates and tobacco consumption - $500 million is also the provincial deficit Finance Minister Dwight Duncan projected for 2008-09 in his October economic statement.

"This is a lot of money that the province could be missing out on during these difficult economic times," McCarter said in a statement, noting the tobacco tax shortfall has "increased significantly" in the past seven years.

"The existence of this tax gap remains a major issue for provincial tax coffers," McCarter said.

The warning comes as Premier Dalton McGuinty repeatedly says some government spending will have to be curtailed as tax revenues slip during a recession.

That's a "scandal" given the squeeze on provincial coffers as the economic downturn continues, said Progressive Conservative Leader John Tory.

The lost tax, along with jail guard absenteeism that "defies any reasonable explanation" and the risks to public safety posed by a court backlog also highlighted in the report show the government is "absolutely incompetent," Tory charged.

"I can think of a lot of good uses for that $500 million," NDP Leader Howard Hampton told reporters.

McCarter urged McGuinty's government to work with the RCMP and Canada Border Services Agency to get "a better handle" on illegal cigarettes, and recalled a conversation with a revenue ministry official who admitted "we don't have a lot of clout on native reserves."

Despite $400 million spent recently to improve the justice system, the attorney general's ministry has "not been successful" in reducing serious court backlogs, McCarter's report added.

The delays are now at their worst level in 15 years, with more than 106,000 criminal cases pending for more than eight months.

That is perilously close to the line set in the 1992 Askov ruling, under which defence lawyers can ask to have charges dismissed because the justice system is moving too slowly.

"These backlogs can have serious ramifications," McCarter said. "Witnesses' memories can fade and long delays are unfair to accused persons, who deserve to have criminal charges resolved within a reasonable period of time."

Attorney General Chris Bentley said his ministry will now look into the reasons why cases aren't moving more quickly despite an increase in the number of courtrooms, Crown attorneys and justices of the peace in the last five years.

"Now it is time to make sure they are all working as effectively as they and we would like them to be," he said.

McCarter's report also said absenteeism by Ontario's 3,400 jail guards is averaging 32.5 eight-hour days a year, happens frequently around weekends and is costing an extra $20 million annually in replacement guards and overtime.

He also found absenteeism "dropped dramatically" on Thanksgiving Monday in 2007, when guards got paid double time.

"Being auditors, we're suspicious," McCarter said of the sick days, noting no one gets fired for poor attendance. He called on the government to do a better job of policing its attendance program to root out abusers of sick leave.

He raised the same concern eight years ago when he found absentee rates climbing from just under 12 days in 1995 to 16 days in 1998.