Thinking about the tobacco black market

The Canadian Convenience Stores Association have asked “the Federal and Provincial governments to adopt a freeze on new regulation or taxation of legal tobacco products until the authorities have significantly reduced the contraband tobacco rate to under 10 per cent for a sustained period”. (Story here.)

Reports of increased black market activity in tobacco have become quite regular and not surprisingly most often from those countries that regularly increase the price of cigarettes (see here for a good five part series in the illegal trade in Canada, or in Ireland ).

Though people will remain loyal to the usual outlets with reasonable price increases, there is a point at which going elsewhere becomes a better choice, and if the market is as tightly controlled as with tobacco, the only real reduction in spending can be got by going to black market sources.

The odd thing about tobacco is that though the original rationale behind the added tax was to address the increased health costs to society though still a popular discussion point, the argument loses strength when you realize that society as a whole pays somewhat for almost all forms of consumption or activities. However, as common a justification these days is that higher cigarette prices will stop some from starting to smoke and give those already smoking a greater motivation to stop.

That probably works on some people but not quite as well as the sin taxers would like. The problem is that this supply side policy does nothing to change the demand. The person still wants to smoke just as much but now the only difference between before and after is that to satisfy their desire they have to pay more. With every other good, they can sacrifice some quality, they can shop around, find a cheaper brand but with a controlled market they have to leave the market itself, step outside of the norm, to restore their previous quality of life.

Among other factors that could drive one to the market is the increased stigmatization of tobacco use (wouldn’t it be less stressful to purchase from someone who appreciates the business?). But buying contraband instead of licit cigarettes could also function as a political act.

First and foremost, everything should have the same sales tax. Picking and choosing who gets taxed more is simple discrimination and that’s wrong. However, if you are going to discriminate, you must allow another source, so that a product can be bought there as a protest. That’s why the native cigarettes, or “reserve rockets”, are so important. Buying them for a lot of people isn’t simply a matter of saving money, it’s a protest against a government that taxes the product 500% (compared, of course, to the 13% most things are taxed). (posted on LiveJournal)

People have been known to withhold taxes because they do not approve of it supporting a war effort. I can think of quite a few reasons why a smoker would not want to pay the tax that have nothing to do with the amount of money involved.

Some of the money collected on cigarettes goes toward social budgets but only some. That money supports organizations that stigmatize smokers, that actively campaign against safer alternative products for smokers, that on one hand work hard for ever more graphic warning labels and on the other for plain packaging, that campaign for ever more encompassing non smoking regulations, and ultimately use these funds to promote efforts to raise the taxes even higher.

Ultimately the most bizarre thing about tobacco taxes is that the user is giving money to the very people who are doing everything they can to remove any pleasure from their consumption. Instead of a sin tax it should perhaps be called a misery tax because that its purpose, to fund the people who make the lives of smokers ever more miserable.

There is much more to be said on this topic and though it might not appear to relate strongly to harm reduction it actually does.

Harm reduction works best as freely chosen within an atmosphere of acceptance and trust and good information. Any stigma works against effective harm reduction and certainly any actions that drive consumers to black markets do the same. Harm reduction also encompasses the concept of someone not participating. Its all about having all the information, having a range of options (some safer than others) and then having the power to choose.

-Paul L. Bergen

One thought on “Thinking about the tobacco black market

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