Government should butt out on tobacco taxes

Our government has indefatigably fought to eradicate the black market in cigarettes—which, as we know, it helped create—yet has done so in vain. The expropriated funds that are burned to fuel this campaign are theoretically inexhaustible, which perhaps explains the government’s enduring resolve in the face of non-fulfillment.

In light of the recent calls of British Columbia’s chief provincial health officer to lift the ban on pure ecstasy, an arguably more realistic cause is worthy of mention. Since the 1980s, exorbitant taxes have been levied on tobacco producers and buyers, save for a minor period of regression during the mid-1990s. Excise taxes of this sort are ostensibly invoked to raise the costs of partaking in a particular activity, namely smoking in this instance.

But as history has demonstrated, to vitiate the trade of any substance is to embark on a futile endeavour. One need only look to the failure to prohibit the sale of alcohol during the early 1900s. Many imbibed freely with little to no care for the law or the propagandistic advertisements that denounced boozing at the time. Still, the same applies to the current scheme to curb tobacco consumption. Notwithstanding the artificially inflated prices and the innumerable educational initiatives, the carcinogenic sticks that smokers so frequently enjoy continue to be a leading cause of preventable death.

Some studies have attempted to elucidate the marginal deterrent effect of tobacco tax hikes, though economists have inferred that any such sanctions are subject to the law of diminishing returns. In other words, as the policy tightens, the gains to be realized increasingly shrink. Over the last decade, as the evidence accordingly reaffirms, the frequency of tobacco cessation has predictably slowed in spite of the countless steps taken to achieve the slightly quixotic smoke-free goal. Yet I have digressed.

The cause for concern is not the relative ineffectiveness of the prohibitive taxes, but, rather, their not so immediately visible consequences. When legislatures impose restrictive conditions on the tobacco industry, individuals are given an incentive to surreptitiously conduct their dealings so as to avoid the legal obstacles and supply cheap cigarettes. Thus, the result is often, and has been in our circumstance, the emergence of a considerable black market for tobacco products.

There is, indeed, a relationship between the swings in contraband tobacco seizures and the changes in the rate at which tobacco is taxed, although the relationship is not without a slight lag. From 1993 to 1994, the federal excise tax on such products was lowered by more than half. Consequently, the amount of cigarette cartons seized by the RCMP decreased substantially from 456,300 in 1994 to 29,000 in 2001.

Following the initial reduction, however, the federal excise tax began to rise incrementally, remaining notably low for a few years. But from 2001 to 2003, the tax rate rose dramatically, approaching a level close to that before the sizable drop of the mid-1990s. After a similar time lag, contraband tobacco seizures began rising again, reaching a record sum of 975,000 cartons in 2009.

At present day, by some estimates, the illicit industry that has grown under the auspices of the high tax regime is conservatively valued at a whopping $2.6 billion. This accounts for roughly 30 percent of all tobacco trade in Canada. Not surprisingly, only a few weeks ago, the RCMP charged three men with committing Excise Act (2001) offences, seizing 725,000 cigarettes in the process. Likewise, two weeks before that, another incident was documented wherein 23,350 cartons of contraband tobacco were recovered.

The list of similar cases is unfortunately too long to relate without inspiring tedium. Our government has indefatigably fought to eradicate this black market—which, as we know, it helped create—yet has done so in vain. The expropriated funds that are burned to fuel this campaign are theoretically inexhaustible, which perhaps explains the government’s enduring resolve in the face of non-fulfillment.

That being said, this war is certainly one which ought to be waged, but in a much more efficient and innocuous manner. The RCMP has publicly stated, “The current trend of manufacturing, distributing, and selling contraband tobacco products remains a serious threat to the public safety and health of Canadians.” Indeed, lives are regularly lost at the hands of the some 175 criminal organizations that participate in the illicit tobacco trade.

This market share with which the numerous crime syndicates have been so tenderly gifted only adds to their capacity to commit barbarities—yes, crimes even more deplorable than the heavily taxed act of smoking. By creating a climate in which illegal commerce is invitingly profitable, we effectively subsidize the dealings of the various criminal groups that exist in our country, for their tobacco revenues end up financing other questionable projects.

To rectify this wrong is rather simple, as simple as flipping a switch. The demand for contraband tobacco exists solely because of the exorbitant prices that consumers are forced to pay for legal cigarettes. Attempting to dragoon the smoking populace into steering clear of the black market is useless in any long-term respect. If we truly want to rid society of such misconduct, we ought to revoke the excise tax.

Nonetheless, it is time to finally—pun intended—butt out of people’s private lives altogether. Aside from the issue of black markets, there is a certain fundamental immorality about dictating the consumption patterns of others. Though morality is the principle upon which law was built, the law cannot build morality, for our fickle legislators do not enjoy the competency to prescribe ideals.

Law, to be objective, must permit individuals to choose a code of ethics by their own reason, so long as the code is not one that infringes on the right of another to do so. Anything more or anything less is immoral and amoral, respectively.

The views expressed in this opinion piece are the author's own and do not necessarily represent those of The Prince Arthur Herald.

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The Prince Arthur Herald

Government should butt out on tobacco taxes

by Alex Vronces

27 June 2012