Tobacco tax rise = smuggling increase

Tobacco tax rise = smuggling increase

• Written by  Jonathan de la Cruz
• Monday, 06 August 2012

With news of increased smuggling activities all over the place, the latest being the now celebrated(?) rice smuggling in Subic and the multibillion-peso smuggling of meat products, it behooves Finance Secretary Cesar Purisima and his associates, in and out of the agency, to review their oft repeated promises that they will be able to ward off smuggling of other products, especially cigarettes and tobacco as they try to railroad passage of the questionable “Sin Tax” law increasing excise tax on these items which most experts believe will result in smuggling. The experience of many countries including the United States is instructive.

More than five years ago, 27 states in the US  decided to raise taxes on tobacco in a move to pump revenue into their cash strapped treasuries. The state officials had the shock of their lives. Not only did the cash increases hardly materialize, a fresh scourge cropped up before their very eyes. Michigan’s Mackinac Center for Public Policy which closely tracks tobacco tax rates across the United States noted that the increases “inspired an increasingly dangerous cigarette industry where big profits lured criminal gangs and drug traffickers into the booming markets.” The Center noted that smuggling is an “unintended consequence of high cigarette taxes.”  .... MORE

Source:  The Daily Tribune

URL: http://www.tribuneonline.org/index.php/commentary/item/2494-tobacco-tax-rise-=-smuggling-increase