Tobacco Smuggling Reaches Epidemic Proportions as Lawmakers Seek to Challenge Criminal Activity
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. In Ireland according to the Irish Tobacco Manufacturers Association 28.3 percent of all tobacco is paid without duty and in Norway a staggering 49.2 percent.
Bloomberg reports: "Lawmakers in Virginia and Maryland passed bills boosting the penalties on smuggling in the past year, and the Massachusetts Commission on Illegal Tobacco released a report March 1 with recoz lower socio-economic groups, and someone on a pack-a-day habit over a year will be over $3,500 worse off. Whether on welfare or a low wage job, some would see this as a regressive tax on the poor. Consequently New York City 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.
"A recent study by the Tax Foundation revealed that almost 57 percent of cigarettes smoked in New York were bought into the state illegally, the highest of any state. That was a 20 percent increase from the previous study, conducted in 2006."
In 2012 alone, the Mackinac Center for Public Policy reported that 56.9 percent of cigarettes were smuggled over the state border.
The cigarette packets were picked up from the floor as litter. A staggering 57.9 percent were counterfeit, where the production, shipping, distribution and selling was organized by criminals. A further 15.8 percent were out of state purchases.
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.