Convenience store owners say the Gallant government is sending mixed messages by cracking down on contraband tobacco, while also driving up the cost of legal cigarettes with tax increases.

A lobbying campaign by the National Coalition Against Contraband Tobacco, a group funded in part by the tobacco industry and convenience store groups, persuaded the Liberals to spend $950,000 a year setting up a nine-officer enforcement unit.

But last month's budget also raised taxes on tobacco, a move the group opposes because it says it will make cheaper, illegal cigarettes more attractive.

"It is a mixed message if you have an enforcement team that's going to crack down on contraband tobacco, and yet when you raise taxes, it will likely send more people to the black market," says Gary Grant, a spokesperson for the coalition.

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Convenience store owner Jeff Green says raising taxes pushes people to support the underground economy. (CBC)

Jeff Green, a Fredericton convenience store owner, said he agrees.

More enforcement "helps protect my market," he said.

But "things like continuously raising the taxes and continuing to restrict the product has the converse effect. It pushes people to want to support the underground economy — the contraband product," he said.

Mike Hammoud, the president of the Atlantic Convenience Stores Association, says the group analyzes the chemical make-up of discarded butts to measure how many cigarettes come from illegal sources.

In New Brunswick, the figure is about 22 per cent, Hammoud said.

Grant said he doesn't know how much of his coalition's budget comes from cigarette manufacturers and convenience store groups, both of which stand to profit if more people buy legal cigarettes.

"I'm not one to criticize people that are working in a legitimate business, a legal business, for trying to stop an illegal market in their own business," he said.

He pointed out other organizations that fund the coalition include Toronto Crimestoppers and the union representing Canadian border guards.

Enforcement unit 'a good start'

The new enforcement unit, headed by a former Fredericton city police inspector, is "a good start," Grant said.

"It indicates to me that the government sees it as a serious problem they're going to put some resources into."

Public Safety Minister Stephen Horsman told reporters in February that the province estimates even a small dent in contraband tobacco, and a resulting increase in legal sales, will cover the $950,000 being spent on the new enforcement team.

"We're hoping if we can just touch on the one per cent, we'll get a million dollars back, so it should pay for itself," he said.

But Horsman cautioned that payback is just an estimate, not a guarantee.

"These numbers can't be an exact number," he said.

"We can't count on it because we don't know what's going to take place in the future."

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The Atlantic Convenience Stores Association says a study of discarded butts shows the use of illegal cigarettes in New Brunswick is around 22 per cent. (CBC)

As for Green, the store owner said while he welcomes the creation of an enforcement team, the tax increase in addition to other provincial decisions have driven smokers to the illegal market.

He says he saw his profits drop after the government banned flavoured cigarettes last year.

"I don't think that everybody who smoked menthol cigarettes is all of a sudden going to stop smoking the tobacco of their choice for years because of a ban," he said.

"They're going to find alternative sources."

Green has operated his gas station and convenience store on Bishop's Drive in Fredericton for eight years.

He said cigarette sales are a key part of his profits.

"It's a cornerstone product," he said.

"In the convenience store industry, tobacco is a very important component of the overall retail opportunity."