At Offsetting Behaviour Eric Crampton has some wise words on the recent activities of Kiwi healthists. One interesting point he raises has to do with the MoHs idea of $100 per pack pricing of cigarettes. Eric quotes Des O'Dea, a lecturer in health economics at Otago, on some of the effects of this new pricing proposal
A leading academic says an extreme increase in the price of cigarettes could lead to black market dealing.It seems that the police and courts don't have enough real crime to deal with, so the MoH want to manufacture new (non)crimes to keep them busy.
Speaking in response to a Ministry of Health discussion to raising the cost of a packet of cigarettes to $100 over the next eight years, Otago University health economics lecturer Des O'Dea said: "We all remember the days of prohibition in the United States and what that did to foster organised crime."
"While I don't think it would be anywhere near the scale of that, we could well see raids on retailers and a black market develop for cigarettes," he said.
Criminal gangs must be loving this idea, it would give them yet another good sources of income. Just like prohibition and the current "war on drugs" a "war on cigarettes" will fail. A tax increase of the size being suggested will only provide the opportunity for criminals to step in and supply cigarettes in a blackmarket. Smokers will still be able to get their smokes, the government misses out on a whole lot of tax, the criminal gangs get rich and we waste a whole lot of money on the police trying to control the illegal trade in cigarettes.
Trying to tax cigarettes to reduce smoke may well work for comparatively low levels of tax, but when you start talking of taxes at the level needed to make a pack of smokes cost $100 you just induce a substitution away from the legal market into the illegal market.