Foolish Politicians, Nannies and Wowsers

Prohibition Redux

The old adage from George Santayana runs, those who do not learn from history are condemned to repeat it.  A corollary is the proverb, a hundred blows on the back of a fool make no impression (Proverbs 17:10), but a word to the wise is sufficient. 

History has illustrated and taught repeatedly that when the state overreaches to ban or criminalise something as contraband (all for our own good, of course), criminals get richer and stronger.  It happens every time.  When governments overreach to ban tobacco and cigarettes, or tax them out of existence, it becomes, in the words of Yogi Berra, deja vu all over again. 

This, from Breitbart London:

Bootleg Tobacco

By David Atherton  
3 Apr 2014, 4:55 AM

New York City is set to challenge an epidemic of bootleg tobacco as a result of high taxes on cigarettes. The situation is similar to other areas of the world, where criminal gangs are finding themselves by selling cheaper tobacco to people who cannot afford the higher prices of legitimate cigarettes.

New York State has a $4.35 tax on a pack of cigarettes and Michael Bloomberg, when city Mayor, added another $1.50. Missouri by comparison is a paltry 17c. A pack in Kentucky costs $4.96, while nearly another $10.00 at $14.50 is what awaits the smoker in New York.  Bloomberg reports: ". . . someone on a pack-a-day habit over a year will be over $3,500 worse off [in New York state]."  . . . . Consequently New York state has seen an epidemic of bootleg tobacco. It is estimated $7 to $10 billion is lost in state revenue annually.

The situation in New York City is even worse. In a paper published in 2012 by Dr Klaus von Lampe of the Department of Law at John Jay College of Criminal Justice, found that in the South Bronx only 19.4 percent of packs were legally purchased with NYC tax paid.  The New York Post reports that: "In an effort to crack down on the sale of illegal smokes in New York, Cuomo is set to announce Monday a 13-agency task force dedicated to keeping illegal cigarettes out of the state.  “This new law-enforcement strategy will help to crack down on these illegal cigarette sales and capture those smugglers who seek to evade the law and rob the state of the revenue it is rightly owed,” Cuomo said. . . .

The people behind the smuggling operations are diverse and sinister. Action on Smoking and Health (ASH) Scotland says the culprits are "Chinese Triads…The Taliban, al-Qaeda, Hezbollah, and the Kurdistan Workers Party." In Europe, the miscreants are allegedly the Russian Mafia, Real IRA and Provisional IRA Certainly, the high profile convictions in New York City of Basel Ramadan and Youssef Odeh in October last year, are alleged to have extremist Islamist ties. They funded themselves by importing cigarettes from Virginia and are also accused of soliciting the murder of witnesses.

In Europe, matters follow a similar pattern. Cigarettes are even more expensive than America where in the UK a pack costs £9.00 ($15.00), Norway £10 ($16.60) and Ireland £7.80 ($9.50).  The Irish Tobacco Manufacturers Association has released new data claiming that 28.3 percent of all tobacco is paid without duty. In Norway the figure is 49.2 percent.  Britain's relatively low smuggling rate of 15.6 percent can be put partly down to smokers crossing the Channel to legally buy Belgium tobacco in Adinkerke. As long as they are for personal consumption you can bring back as much as you like.

There are two ways this situation can be dealt with, either enforcement or lower taxation. As you imagine, Sheila Duffy of ASH Scotland prefers enforcement. She said to me today "The key way to tackle the illicit trade it through enforcement.  Improved enforcement, and restrictions on the smuggling links of tobacco companies themselves, has seen illicit tobacco in the UK consistently decline over the last decade, while tobacco regulation has increased."

While Simon Clark from the smokers group Forest said to me, "Instead of launching a cigarette smuggling task force, paid for with public money, they should reduce tobacco taxation. It's not rocket science!"

Whether either option gets adopted or in part, tobacco smuggling threatens to not only undermine legitimate businesses but, worryingly, the rule of law too.

American Prohibition saw nearly a whole society turned into deliberate or unwitting criminals.