High Taxes May Drive Cigarette Smuggling, BBC Discovers

It may be obvious that high taxes on goods like
cigarettes create a massive incentive for a black market in which
buyers can get what they want at a price that’s not jacked up by
the state’s take and sellers can profit by catering to that demand.
That’s obvious to you and me. But to politicians and lots of
journalists, that chapter of Econ  101 seems to have been
ripped out of the textbook. So it’s refreshing to see a venue like
the BBC—the UK government’s own “independent”
mouthpiece—acknowledge that tobacco smuggling isn’t just an
inexplicable manifestation of the darkness in humanity’s heart, but
a logical outcome of politicians raising taxes too damned high.

The blurb for
the BBC broadcast reads:

We look at the rising tide of global contraband – specifically,
the smuggling of tobacco. It’s estimated some 50 billion dollars of
the stuff is carried across borders and sold, tax-free, every year
around the world. That is a cost to governments and it also poses a
health risk to consumers. But at what point do you stop blaming the
criminals and the law-enforcers, and when do you start blaming
governments themselves for imposing such high taxes on tobacco?

The full audio report can be heard at the link above. It notes
that, because of taxes, cigarettes in Britain can now be wildly
more expensive than smokes in developing countries, crating an easy
source for smuggled product. The 2012 chart
from the World Health Organization, below, shows that taxes
represent about 80 percent of the price of cigarettes in the UK and
across Europe. Drug smuggling rings, not surprisingly, have moved
into the tobacco market.

Listen as Arthur Laffer tells the BBC correspondent that taxes
are not a magic means of discouraging behavior you don’t like,
because people are stubborn creatures who will find ways to do what
they want to do. He’s especially interesting explaining that
uniform tobacco taxes across the world won’t solve anything,
because then you’ll just fuel illicit manufacture of
cigarettes—something that should be easy to extrapolate from the
whole drug smuggling ring thing.

Still, the BBC report is a step forward. A lot of health
“experts” have a
lot to learn about human activity in a world where
black markets are old news.