Europeans Apparently Don't Like Paying Sky-High Cigarette Taxes

Europe appears to be on a bit of a roll, tax-wise, these days. The other day we heard about Greeks' impressive tax-dodging skills; today we learn that Europeans, overall, don't want to pay sky-high taxes on cigarettes. Government officials scold their subjects for failing to live up to their obligations, but maybe the real lesson here is that people can only be squeezed so hard before they look for relief wherever it might be found.

From the New York Times:

For years, law enforcement officers and smugglers have played cat and mouse in Europe, where contraband cigarettes are stashed in everything from furniture shipments to loads of Christmas trees. But Europe’s four-year-old economic crisis is expanding the black market for cigarettes, robbing European Union nations of valuable revenue and drawing in a new class of smugglers.

The Times quotes a British judge lecturing a blind man who was caught with a horde of 200,000 smuggled cigarettes.

“You are 61 years old, and apart from a sentence in your youth for cannabis possession, you have remained law abiding for the last 40 years,” Judge David Tremberg lectured him in court, issuing a curfew and a fine of about $1,000. “At a time when the public purse is at breaking point, this business robs the country of much-needed finances.”

Indeed, the impact of lost tax revenues is enormous, especially since the European Union is partly financed by customs duties, 75 percent of which are passed to the bloc by its member nations.

The lost tax revenues are pretty significant. In Andalusia, "contraband cigarettes commanded 20 percent of the market," while in Ireland "smugglers are robust competitors with legal cigarette companies, reaching more than 17 percent." Overall, smuggled cigarettes are estimated to account for 10 percent of the European market, costing governments "1 billion euros missing in the E.U. budget and up to 9 billion euros missing in the member states."

Why, one wonders, would perfectly nice European people not just smuggle untaxed cigarettes, but also purchase them from smugglers, costing their hard-working government officials "much-needed finances" that would otherwise help them balance those oh-so-tattered budgets? Hmmm ...

“I sell a pack for 9.20 euros, while they can get one for 3.20,” about $7.30 less, Mr. Gilsenan [a Dublin shopkeeper] said, noting that his sales declined 40 percent in the last four years and resulted in layoffs of two employees. Since then, he and other shopkeepers have formed a group called Retailers Against Smuggling that is pressing for higher penalties for smugglers.

A peak at European tobacco tax rates (PDF) shows that the cheapest place to buy cigarettes in the EU is Luxembourg, where taxes make up 61.11 percent of the tax inclusive retail selling price per pack, or 70.12 percent of the weighted average price per pack, depending on how you want to calculate it. By contrast, Americans pay an average (PDF) $1.49 in state taxes per pack of cigarettes, wth an average price per pack of $5.97 (not counting local taxes). Despite lower tax rates than Europeans pay, the U.S. still has plenty of cigarette smuggling, with the National Center for Policy Analysis pointing out in 2002:

The growth of cigarette smuggling is a key reason why cigarette tax revenues are not keeping pace with tax increases. Between 1992 and 2000, the average state cigarette tax rate increased 64 percent while gross state tax revenues rose only 35 percent. [See Figure II.] The apparent fall in smoking rates over this period was not nearly enough to account for the revenue shortfall. This suggests that states expecting higher revenues from recent cigarette tax increases may never see them.

USA Today explicitly stated the cause and effect last year:

A recent wave of state tobacco tax increases, designed to pump revenue into cash-strapped local governments, is inspiring an increasingly dangerous cigarette smuggling industry where big profits lure violent criminal gangs and drug traffickers into the booming illegal market, according to law enforcement officials and court records.

Who knew that if you tried to tax people beyond their willingness to pay, they'd look for alternatives that allow them to escape high taxes? It's a revelation.

At least, it's a revelation to government officials who see the little people as nothing more than milking cows for "much-needed finances."

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  • juris imprudent||

    Who knew that if you tried to tax people beyond their willingness to pay, they'd look for alternatives that allow them to escape high taxes?

    Clearly the boot is not being applied firmly enough! The proles need to be reminded of their roles.

  • nipplemancer||

    The obvious solution is to raise taxes to make up for the revenue shortfalls due to smuggling. And of course sentencing smugglers to very long prison terms.

  • ||

    They could transport them to Australia, like in the good old days.

  • nipplemancer||

    We certainly do have a dearth of prison colonies. How bout we wall off California?

  • The Hammer||

    Screw that. California is beautiful and has wonderful weather. I say take it back from the liberal hordes as soon as it bottoms out. Use Massachusetts for the prison colony, it sucks anyway.

  • ¿Ex Nihilo?||

    California is beautiful and has wonderful weather.

    So does Greece. Coincidence??

  • ¿Ex Nihilo?||

    It's almost like prohibition never happened. Those that do not learn from history...

  • Auric Demonocles||

    Well, it never happened over there.

  • ||

    Actually, almost all countries have taken a stab at prohibition at one time or another.

    Maybe not as drastic as the US experience but the impulse of selfrighteous busybodies to impose their preferences is pretty much universal.

  • Sevo||

    "...robbing European Union nations of valuable revenue..."

    It is possible to steal from a thief, but keeping that thief's hand out of your pocket certainly isn't 'robbing' him.

  • Sudden||

    I came here to refer to the same NYT language as you and Epi. FFS, they are so transparent in their view of everything for the state, nothing outside the state.

  • ||

    robbing European Union nations of valuable revenue

    At a time when the public purse is at breaking point, this business robs the country of much-needed finances

    When you don't let us steal more from you, you're robbing us.

    Ladies and gentlemen, there is the logic of the state in a nutshell. Nothing is yours, ever, except what the state lets you keep. And have fun paying that property rent tax on that property you "own", too.

  • ¿Ex Nihilo?||

    Nothing is yours, ever, except what the state lets you keep. And have fun paying that property rent tax on that property you "own", too.

    FIFY

  • ||

    There's a reason own was in quotes, dude.

  • ¿Ex Nihilo?||

    I know. Just reiterating for the slower types.

  • Lord Humungus||

    duh? wut?

  • Elphie||

    If I walk up to some guy in the street and tell him to give me his money and he refuses, can I have him arrested for robbing me?

  • ||

    Are you the government?

  • EDG reppin' LBC||

    I dispute the alt-text. Filterless Gauloises were the most delicious cigarettes ever marketed. Unfortunately, the French picked up the fashion of smoking American brands. This cut so deeply into Gauloises market share in France, that the firm could barely continue operations. Eventually the company was sold to a Spanish firm (back in 2003?) and the quality of tobacco/taste seriously suffered. I haven't seen Gauloises in the US since 2005. I smoke Camel nons now, anyway. But goddamn I loved Gauloises.

    The French want to ban California wines, because California banned foie gras.

  • SugarFree||

    It's good to see The French using their powers for good for a change.

  • ||

    What would a French super-villain be called? Grand Mal?

  • SugarFree||

    "Sacrebleu! A spoon! How did zey know my one weakness!"

  • ||

    I thought Grand Mal's weakness was rapidly blinking lights.

  • SugarFree||

    Not unless his powers come from a seizure...

  • ||

    Way to actively misunderstand, jerk!

  • ||

    Merde Maude?

  • A Serious Man||

    Hollande Sauce?

  • Pro Libertate||

    Le Trine?

  • Brandybuck||

    Gauloises always stunk. They may have tasted fine to you, but to everyone else they smelled like you were smoking feces. Even twenty years ago at the height of my own smoking (and damaged olfactory senses), I could pick the Gauloise smoker out of a bar full of smokers seconds after walking in the door.

  • Invisible Finger||

    robbing European Union nations of valuable revenue

    The NYT editor should be scolded for being a disciple of Goebbels.

  • Sudden||

    Scolded? That is the kind of boot-looking authority-worship that gets one's name on the Pulitzer short list.

  • Sudden||

    Boot-lookinglicking.

    Joe'z law somewhere in that?

  • SugarFree||

    No. JL is all about the likilehood of making a typo or grammar mistake when making fun of someone else's grammar, spelling or typo.

  • Kaerie||

    Not to say I don't believe there's been an increase in cigarette smuggling and theft, but I'd like to see the numbers on people who have quit because they're sick of paying the taxes. In other words, are they assuming that all loss of sales is due to smuggling, or are they taking attrition into account? *puffs an e-cig with lovely pear/coconut flavored nic juice*

  • A Serious Man||

    Re alt-text: Funny, I remember one time a European exchange student told me that many Euros quit smoking when they move to America because most American cigs taste like shit to them.

  • Sevo||

    Could be, but to hear the Euros tell it, all those folks in line at French Micky D's must all be tourists.

  • blackjack||

    "At a time when the (private sector economy) is at breaking point, this (immoral, unfair tax) robs the (citizens) of much-needed finances"

    Fixed it.

  • Anonymous Coward||

    Cigarette taxes: How the government exploits addicts AND makes money in the one fell swoop.

  • SIV||

    The first thing Obama did in office was to sign a $.70 fed tax increase on cigarettes.

  • Rasilio||

    Well Duh

    When you tax a specific product the larger the tax the more room there is for an illicit seller to undercut legitimate sellers and still make a profit even after accounting for the increased costs of circumventing the law and the risk/penalty of getting caught.

    That said there is an incorrect assumption that the article and the Euro governments are making here. Namely that all of the smokers who currently buy their cigarettes under the table would just acquiese and pay the higher price of black market cigarettes were not available. Clearly this is not the case, at least some and possibly even most of them would use the higher price as a reason to quit. Therefore the amount of revenue being denied to the government is less and possibly far less than the estimate indicates. It also fails to account for the fact that most of the money smokers save buying black market cigarettes plus the money the smugglers earn selling them is likely then spent on other legitimate market purchases which are subject to the VAT and other taxes reducing the shortfall even further.

  • Sevo||

    "Therefore the amount of revenue being denied to the government is less and possibly far less than the estimate indicates."

    Your logic is correct, but it's pretty much irrelevant to the fact that governments lie.
    They do so constantly and because they can; takes no justification whatsoever.
    Wee, oh, the prez, for example.

  • ||

    “At a time when the public purse is at breaking point, this business robs the country of much-needed finances.”

    Next they will combine this with individual mandate logic and go after treasonous tax scofflaws who quit smoking.

  • aelhues||

    The whole concept of a sin tax pisses me off. We really should have a law against variable tax rates on transactions. Allowing government to "influence" our purchase decisions through higher taxes gives them too much power, power that is too often abused.

  • Lord Humungus||

    gee, how do markets work again?

  • mad libertarian guy||

    For years, law enforcement officers and smugglers have played cat and mouse in Europe, where contraband cigarettes are stashed in everything from furniture shipments to loads of Christmas trees. But Europe’s four-year-old economic crisis is expanding the black market taxes for cigarettes to punitive levels, robbing Europeans Union nations of valuable revenue income and drawing in a new class of smugglers making criminals of those who just want to smoke in fucking peace without going broke.

    FIFY

  • mr lizard||

    I would recommend those roll-your-own places, but the cigarettes taste like hot ass-air.

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