Lawmakers across the developed world seem to be united behind the idea that the best long-term approach to reducing levels of smoking is to keep on hiking the price of tobacco products until consumers can no longer afford them. Earlier this week, CBC News reported that an internal Health Canada study recommended that Ottawa should significantly increase the price of cigarettes if it wants to meet its target of reducing smoking levels to 5% of the Canadian population. In the UK, British Chancellor Philip Hammond yesterday used his Budget speech to announce that the price of a packet of cigarettes in Britain will continue to rise at 2% over the rate of inflation. The Australian government intends to take the price rise strategy to extreme lengths by increasing the cost of a packet of cigarettes to A$40 ($30.33) by 2020. But while numerous studies have shown that making tobacco products more expensive does reduce levels of smoking, there is evidence to suggest that increasing the cost beyond a certain point may have more negative effects than positive.
A report published at the beginning of November by the Washington DC-based Tax Foundation think tank revealed that New York, which levies the highest rate of state cigarette taxation in the US, is the country’s capital of illicit tobacco. The Tax Foundation estimates that in 2015, the latest year for which data is available, 56.8% of all cigarettes smoked in New York were smuggled into the state. New York City Mayor Bill de Blasio announced he would like to see tobacco taxation rise still further in the state, suggesting that cigarette tax should increase by $2.50, bringing the minimum price for a packet of smokes up to $13. This would make cigarettes purchased in New York three times more expensive than those bought in North Dakota, making interstate tobacco smuggling even more attractive to organised criminals. In Europe, 9% of all cigarettes smoked were fake or smuggled last year, representing an overall tax loss to European governments of as much as €10.2 billion ($12.16 billion), according to a study from KPMG. The report noted that this made illicit tobacco one of the largest major players in the European cigarette market last year. In May, a separate KPMG report revealed that the Australian government lost A$1.61 billion last year as a result of tobacco smuggling, and that 13.9% of tobacco products consumed in the country were illicit
Put simply, repeatedly raising the price of tobacco products both increases the profits organised criminals can make from the illicit cigarette trade, and makes it more likely that those who are determined to continue to smoke will seek out cheaper ways of doing so, be they legal or not. The fact that cigarette prices in many western countries are going up at such a fast pace makes it inevitable that the illicit tobacco trade will continue to grow, losing governments billions of dollars’ worth of lost tax revenues, and lining the pockets of organised criminal gangs and terror groups. In countries such as the UK and Australia, and in certain US states, the point at which the positive effects of repeatedly hiking the cost of tobacco products continue to outweigh the negative seems to have passed. While the World Health Organisation has said that increasing the price of tobacco is one of the cheapest and most effective ways of reducing smoking, the wisdom of piling taxation onto cigarettes sold in the developed world is looking increasingly shaky as prices continue to go up and up. If anything, prices need to go up in low to middle-income countries, which are home to 80% of the world’s smokers.
As tobacco prices continue to rise in developed countries, more organised criminals will be drawn to the illicit cigarette trade, which is becoming all the more attractive to smugglers as potential profits soar; not least due to the fact that illicit tobacco is much less risky than drug dealing or people trafficking. The fact that profits from cigarette smuggling are known to fund terrorist groups such as Daesh, Hezbollah and al-Qa’ida makes the policy of continually fuelling the trade by whacking up prices in the developed world look increasingly questionable. As well as creating business opportunities for criminals and terrorists, high cigarette prices are also resulting in the loss of huge amounts of tax that could be spent on public health initiatives and research into smoking-related illnesses.
Increasing tobacco prices has played a major part in cutting smoking rates in many countries across the world, but the time has come to recognise that continually hitting tobacco enthusiasts in the pocket will not eradicate the habit. Putting the libertarian argument that people should be allowed to smoke themselves into an early grave if they so wish to one side, the time has come for policy makers to accept that putting up the price of tobacco again and again has serious consequences that have for some time now outweighed the benefits of doing so. In developed countries at least, governments that want to reduce smoking rates must come up with new ways to persuade smokers to stub out the habit for good.
Spanish police discover subterranean counterfeit cigarette factory near Costa del Sol
Police in Spain have raided an underground illicit cigarette factory run by a British organised crime network.
In an operation supported by Europol and law enforcement agencies from countries including Lithuania, Poland and Britain, investigators found the subterranean bunker close to the Costa del Sol, rescuing six Eastern European modern slaves who had been forced by the gang to work and sleep at the facility.
The factory, which had been built nearly four metres underground, is said to have been capable of producing illicit cigarettes at the rate of 3,500 every hour.
Police said the workers they found at the factory had effectively been “left to die” after suspects arrested above the ground turned off the system that provided them with clean air in order to hide the bunker from law enforcement agents attending the site.
In total, 20 suspected members of the gang thought to be responsible for the factory were arrested in the operation, including a Briton who is said to have been on the run from authorities in the UK after failing to return to prison while on temporary release while serving a sentence linked to drug and forgery offences.
Thirteen separate locations were raided by police in the operation.
These raids resulted in the seizure of more than one million counterfeit cigarettes, 20kgs of herbal cannabis, 144kgs of marijuana, three weapons, eight GPS tracking devices, and a jamming device that the network likely used to help its members avoid the attention of police.
Investigators said the counterfeit cigarettes the gang made in its underground bunker were produced in unsanitary conditions and consisted of low-quality ingredients and components.
Detectives were forced to use a forklift truck to move a shipping container that was concealing the entrance of the underground facility.
In a statement, Spain’s Guardia Civil said most of the suspects arrested were British citizens, including the alleged 30-year-old ringleader of the conspiracy, who was identified only by the initials DD.
Another of the detainees, identified only as AR, was said to have been a Lithuanian national listed as having fled from justice in his home country while wanted in relation to smuggling offences.
In a statement relating to its involvement in the operation, Europol said: “Europol facilitated the information exchange between the participating countries, provided coordination support and analysed operational information against Europol’s databases to give leads to investigators.
“Europol also provided on-the-spot operational support by deploying two analysts to Malaga, Spain, to provide real-time analytical support.”
Gibraltar and Japan Tobacco International agree to tackle smuggling of firm’s cigarette and rolling tobacco brands
Officials in Gibraltar and UK customs authorities have teamed up with Japan Tobacco International (JTI) to protect the legitimate trade in tobacco products and foster a stable and transparent tobacco market in the British overseas territory.
The aim of the new partnership, which was agreed during the signing of a memorandum of understanding (MoU) on Friday, is to prevent smugglers from trafficking JTI brand tobacco problems into Spain via Gibraltar.
The agreement will see the signees work to improve information and intelligence sharing, and result in customs workers based in Gibraltar receiving training on how to tell the difference between authentic and counterfeit tobacco products.
One of the largest importers and producers of tobacco in Europe, JTI owns numerous high-profile brands that are routinely targeted by smugglers, including Winston, Camel, Silk Cut, Benson and Hedges, American Spirit and Old Holborn.
The MoU was signed during a ceremony at Gibraltar International Airport in the presence of Chief Minister of Gibraltar Fabian Picardo, Collector of Customs of HM Customs Gibraltar John Rodríguez, and Tom Osborne, JTI Iberia General Manager.
Members of the Anti-Illicit Trade Department of JTI were also in attendance.
Picardo commented: “We welcome the signing of this MoU with JTI as we are committed to working in partnership with the tobacco manufacturers to eradicate illicit trade in tobacco products. Illicit trade fosters further criminality across frontiers, unsociable behaviour and harms legitimate business.
“We continually review our procedures and legislation to ensure proper compliance with our laws and conditions of tobacco licences by all local entities involved in the tobacco business.”
Speaking as the agreement was signed, Osborne said it is vital that the tobacco industry works with world governments to prevent the counterfeiting and smuggling of its products, noting that the illicit trade in cigarettes and rolling tobacco is an issue that “impacts tax collection, the stability of the market and promotes disrespect for the law and disrupts public security”.
Last week, UK tobacco industry trade body the TMA published the results of a poll that showed the illicit trade in tobacco products “remains resilient” in Britain.
The survey, for which 12,000 adult smokers were questioned, revealed that more than three-quarters (76%) of respondents had purchased tobacco products over the preceding 12 months on which UK tax had not been paid.
TMA Director Rupert Lewis said: “These survey findings highlight the volume and widespread availability of illicit tobacco throughout the UK and the ‘relaxed’ attitude that many consumers have towards buying and selling illicit tobacco, believing it to be a ‘victimless’ crime.”
Australian tax authorities seize and destroy illicit tobacco crop with estimated excise value of A$34.5 million
Tax authorities in Australia have confiscated and destroyed more than 26 tonnes of illicit tobacco that would have deprived the country’s government of an estimated A$34.5 million ($23. 55 million) in tax had it been sold on the black market.
The seizure was made after agents from the Australian Taxation Office (ATO) carried out raids at illicit tobacco farms across at five sites in New South Wales (NSW).
Acting on intelligence and in cooperation with officers from NSW Police, ATO investigators discovered 50 acres of illicit tobacco crops, of which 30 acres contained mature plants almost ready for harvesting, and a further 20 acres that recently plated crops.
The ATO said no arrests had been made in connection with the illicit tobacco, but added that the operation resulted in the identification of two men who were in Australia illegally.
Police are continuing to investigate the discovery of the crops, as well as the alleged illegal removal of water from the Hastings River as part of the cultivation process.
Commenting on the seizure, ATO Assistant Commissioner Ian Read said: “The trade in illicit tobacco products in Australia has widespread negative consequences across the community. Tobacco growing operations are not run by small producers or farmers.
“They are run by organised criminal syndicates who deliberately engage in illegal activities.
“Involvement in illicit tobacco production is a serious offence. This type of activity takes vital money away from the community and places it directly into the hands of organised crime syndicate.”
In September of last year, 9News reported that the market for smuggled, illicit and counterfeit cigarettes exploded across the country in 2019, with Australian Border Force officers seizing more than 300 tonnes of smuggled contraband tobacco.
That figure was more than three times higher than the amount seized in 2017.
“We’re talking about large criminal entities interested in making money off the tobacco industry,” Western Australia Border Force Commander Rod O’Donnell commented.
“There’s money to be made if you can get the products in and sold into the black-market economy.”
Last month, Australian police arrested a man in connection with a plot to smuggle tobacco products with an estimated excise value of A$24 million into the country.
Officers from Australia’s Illicit Tobacco Taskforce (ITTF) detained the man at Melbourne Airport before he was later charged with five offences under the Customs Act 1901.
Prosecutors claimed the man was involved in a plot to smuggle almost 16 tonnes of loose-leaf tobacco and over 20 million cigarettes into Australia.
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