Saturday, July 23, 2011


The government is currently tying itself up in knots over various policies in which it's trying to either raise revenue by increased taxation or social engineer us into taking better care of our health often enough by increased taxation and restrictions on where and when we can do certain things. The smoking ban and various on street drinking bans spring to mind along with the yearly above inflation duty increases that come with each budget. Of course one of the things that happens when prices go too high is that people will look for alternatives, even banning a product will not work, look at just how well prohibition worked in the USA to see a classic example of meddling with the market, consumer simply went to those who were prepared to supply them with what they wanted, in that case it was criminal gangs, which is where most drug users in the UK go as simply banning a product doesn't prevent people from getting what they want anyway.
Twelve million counterfeit cigarettes have been discovered during a search of a warehouse in Gateshead.
HM Revenue and Customs officers said it took three lorries to remove the haul and a full day to count the cigarettes.
The haul, worth £2.2m, was found during checks on industrial sites in the area on Wednesday.
HMRC spokesman Michael Connolly said the find was "staggering" and the largest ever seizure of its kind in the North East.
"This was a staggering amount of cigarettes to uncover in one place and shows the scale of this type of crime," he said.
"Each year the British economy loses over two billion pounds in duty from the sale of illicit tobacco, money that is ploughed straight back into funding other criminal activity in our neighbourhoods."
 A classic example, the government makes the price too high by piling on the duty and the criminal element see an opening and sell people cheap cigarettes and no doubt make a large profit as there wont be much in the way of quality control or other checks. You also have the HMRC complaining about the loss in revenue and yet who is to blame for this situation? Well the pointing finger goes straight back to those who made the product too expensive in the first place, Her Majesties Government and the anti-smoking lobby who encouraged the authoritarian anti liberty ban and the various duty hikes, although the government has always used drinkers, smokers and motorists as cash cows anyway and didn't need much encouraging.
This, all in all is a classic example of free market policies, make something too expensive and people will look for alternatives. If the government want to increase revenue then it needs to lower duty to the point where people will buy the legit product and the criminals will move onto something else.

2 annotations:

Curmudgeon said...

Absolutely right, and it is this attitude that indirectly led to the recent tragic deaths in Boston. If booze wasn't taxed to death, there wouldn't be a worthwhile profit in bootlegging.

English Pensioner said...

With all forms of taxation, there comes a point where people start to look at avoidance methods whether legal or illegal. Legal avoidance starts when the cost of employing an expert (such as an accountant) is less than the potential savings, illegal avoidance comes when the profit in breaking the law becomes greater that the likely financial cost of getting caught.
But taxing cigarettes and alcohol isn't solely for the money; a government has to "kow tow" to all the pressure groups who want to ban them completely.
In practice it has been calculated that if the government reduced cigarette and alcohol taxes the exchequer would be better off. The NHS costs would be lower (we all require hospital treatment before we die; with smokers and drinkers it comes sooner). So money would be saved on pensions and on-going health care as well as cutting crime.
I would argue the same about "illegal drugs", if these were made available at the pharmacist, the idiots who take them would still die, but crime would be reduced and the drugs could be taxed!