Huge Expansion in Illicit Cigarettes

The Results From Prohibition Remain

We are all familiar with the downside of prohibition.  When the State makes the ingestion of something illegal, the black market takes over.  Hidden away from "prying eyes" the trade continues and huge profits can be made.  

As the old story has it, when places in Italy banned the breeding of snakes, the numbers of snakes increased exponentially.  Why?  Because the ban made the breeding and trading of snakes expensive and therefore a profitable line of  trade.  We have seen exactly this dynamic take over the importation, manufacture, and distribution of cigarettes in NZ. 

A ten per cent increase in excise duty every year since 2011 has driven New Zealand prices to the second-highest in the South-east Asia/Pacific region, behind only Australia. An average pack might cost $31 in New Zealand, but just $1.62 in Vietnam, $5.29 in China and $6.07 in Korea.

A tobacco industry source said the major companies typically made just a few per cent profit on each cigarette, with three-quarters of the sale price going to the government: "So if you can cut 75 per cent out of your costs, then it can become very lucrative." Each individual cigarette is worth about $1 to the government.  [Stuff]

And so it has come to pass: the importation and sale of cigarettes is now extremely lucrative.
  The mad attempt to force citizens away from smoking cigarettes has resulted in an hugely profitable illicit trade.  Now the organized crime gangs have decided that the risk/return dynamic is well worth their participation in the illegal trade.

Bruce Berry, Customs' national investigations manager, . . . said Chinese and Korean communities were the main source of the illicit trade, and much of it was conducted almost openly on social media. Customs were battling against a community belief that cigarette smuggling was not a serious offence.  Berry said the price of cigarettes was now high enough that the profit margin for smugglers was appealing enough to attract organised crime.

"It's been a consistent message from Customs for a while now that we'll see an increase in this [smuggling] as we reach that tipping point," he said. "We are well past it now, and it [tobacco] is a viable commodity in its own right. Organised crime are just in it for the money, they are not interested in what harm this is doing to our community: it's just the same thing as drugs." 

Conclusion: 

Cigarette smuggling is booming, with Customs warning that organised crime syndicates are now muscling in because of the huge profits to be made.  The high cost of a packet of cigarettes here, and the relatively low cost in nearby Asian countries makes New Zealand a prime target.

Lest we forget, it was now retired politician, Tariana Turia who forced this upon New Zealand.  She was intent upon delivering and protecting Maori from the costs and health implications of smoking tobacco.  The ultimate do-gooder has both increased tobacco consumption amongst Maori and greater Maori impoverishment at the same time.  A neat trick all around.