Adam Smith on smuggling

Here is Adam Smith talking about smuggling wool:

The prohibition, notwithstanding all the penalties which guard it, does not prevent the exportation of wool. It is exported, it is well known, in great quantities. The great difference between the price in the home and that in the foreign market presents such a temptation to smuggling that all the rigour of the law cannot prevent it. This illegal exportation is advantageous to nobody but the smuggler.

So let’s fast forward 200 years:

It costs around $2.80 to buy a packet of Marlboro cigarettes in China, the world’s largest producer and market for cigarettes. The retail price in Australia is $20.60, almost 10 times higher.

The bulk of this price chasm is Australian taxes – $14 per pack in excise and almost $2 in GST. So 90 per cent of the difference is taxes. It would be hard to find a clearer price signal to establish a black market. The profit potential is enormous.

What possibly could be the consequences?

NSW Health has told a review of tobacco laws that its inspectors have detected increased sales of illicit tobacco, which is packaged without health warnings and is sometimes blatantly labelled “illegal tobacco”.

Over the past two years, illegal sales were detected 28 times at retailers throughout Sydney, including at Haymarket, Glebe, Marrickville, Earlwood, Ashfield, Harris Park, Auburn, Wakeley, Strathfield, Punchbowl and Canterbury. Of those, 13 have not yet been successfully prosecuted.

So it is nice to know that things haven’t changed much.

So what would a rational response be?

The tobacco industry has threatened to launch super-cheap cigarettes costing just $9 a pack in response to a growing black market in cheap, illegal tobacco, which health officials claim they are powerless to seize.

Given that the legal industry can only compete against illegal tobacco on price and no longer on branding it is unsurprising that they would do so.

The plain packaging legislation was bad policy and was always going to have unintended consequences. Important to note, however, not unforeseen consequences. We have a law on the books that encourages criminality, costs government revenue, and doesn’t actually inhibit smoking (of it it does the anti-smoking lobby are carefully hiding the evidence).

The Gillard government had three major policy reforms: the mining tax (now repealed and seen as a massive failure), the carbon tax (now repealed and deeply unpopular), and plain packaging. This policy too should be repealed.

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41 Responses to Adam Smith on smuggling

  1. Infidel Tiger

    The Liberals will never repeal plain packaging. If anything they are bigger supporters of denying property rights and championing fascism than the lunatic ALP.

  2. .

    Infidel Tiger
    #1685653, posted on May 18, 2015 at 10:30 am
    The Liberals will never repeal plain packaging. If anything they are bigger supporters of denying property rights and championing fascism than the lunatic ALP.

    I suspect a dodgy link between the AMA and the Liberals.

  3. Paul

    “I suspect a dodgy link between the AMA and the Liberals.”

    Gee, Y’think?

  4. Baldrick

    In June 2013, two illegal tobacco importers in Queensland were sentenced to 20 months gaol each for illegally importing 7,000 cartons of cigarettes, or 1.4 million cigarettes, from Korea.

    What does it say about our society when the illegal import of cigarettes is punished more than pae-dop-hilia.

  5. .

    It says we ought to end the insane and counterproductive war on drugs and reduce police ranks, and to severely punish real criminals who damage children, and not those who scoff at paying exorbitant taxes.

    It also says the government is more concerned with protecting its loot than protecting its citizens and properly administering justice.

  6. C.L.

    The AMA are fascist quacks.

    The AMA officially opposed Zoe’s Law – throwing the organisation’s support behind men who bash women’s unborn children to death.

    The tobacco industry has threatened to launch super-cheap cigarettes costing just $9 a pack in response to a growing black market in cheap, illegal tobacco, which health officials claim they are powerless to seize.

    Yeah and I just heard the extremist Cancer Council spokesman wetting his pants about this on the news. They will pressure Abbott to ban these cigarettes and the softcock will obey.

    Watch.

  7. H B Bear

    You can’t have an incoming government repeal plain packaging laws simply because they don’t work. Think of the precedent it sets for all the other legislation.

  8. thefrollickingmole

    What does it say about our society when the illegal import of cigarettes is punished more than pae-dop-hilia.

    It says that children need to be taxed so as to put them out of the reach of pedos?
    It says we should stiuck all kids in freedom sacks so pedos arent tempted by shiny packaging?
    It says we should pass laws banning pedos from being pedos in public places? (which will lead to shivering bunches of pedos outside buildings huddling together for their fix)

    Actually what it says is, the government is deadly serious about collecting “their” money and will ruthlessly crush anyone in competition with all the investigative and coercive powers of the state.

  9. If they had made the Tree Food Tax revenue neutral and used the proceeds to cut marginal rates pro-rata, it would have got through. But the New Communists wanted their own slush fund.

    Make all drugs free to sell and use, but any adverse consequences must be exempt from Medicare, you’d have to self insure.

  10. Infidel Tiger

    The AMA is a club for psychos who like to murder children, starve elderly people to death and deny poor people pleasure.

  11. .

    Actually what it says is, the government is deadly serious about collecting “their” money and will ruthlessly crush anyone in competition with all the investigative and coercive powers of the state.

    The government does not like competition.

  12. Fred Lenin

    These tobacco bootleggers the non thinking interlecchools have created ,are like the bootleggers of Prohibition days. Wonder if there are any Al Capones ,or worse still Joe Kennedys among them .
    Only in America could. Criminal Bootleggers son become President ,cant really talk we had a criminal lawperson as our first “woman”? PM.

  13. boof

    You can always grow your own.

  14. ar

    The strugglers of Struggle Street were almost constantly smoking. High prices obviously don’t deter them. All cigarette taxes do is take their rent money.

  15. .

    NO YOU CANNOT BOOF

    EXCISE ACT 1901 – SECT 28

    Only licensed producers to produce tobacco leaf etc.
    (1) A person who does not hold a producer licence must not intentionally produce material that is tobacco seed, tobacco plant or tobacco leaf knowing, or being reckless as to whether, the material is tobacco seed, tobacco plant or tobacco leaf.

    Penalty:

    (a) for tobacco seed or tobacco plant–2 years imprisonment or 500 penalty units; and

    (b) for tobacco leaf–2 years imprisonment or the greater of:

    (i) 500 penalty units; and

    (ii) 5 times the amount of duty, worked out under the regulations, being the duty that would be payable if the tobacco leaf had been manufactured into excisable goods and entered for home consumption on the penalty day.

    Note: See section 4AA of the Crimes Act 1914 for the current value of a penalty unit.

    (2) A person who does not hold a producer licence must not produce tobacco seed, tobacco plant or tobacco leaf.

    Penalty: 100 penalty units.

    (3) Strict liability applies to subsection (2).

    CRIMES ACT 1914 – SECT 4AA

    Penalty units
    (1) In a law of the Commonwealth or a Territory Ordinance, unless the contrary intention appears:

    “penalty unit ” means $170.

    (1A) The Attorney-General must cause a review of the amount of a penalty unit to be conducted as soon as possible after each third anniversary of the day an alteration of the amount of a penalty unit last came into force.

    (2) In this section:

    “Territory Ordinance ” means an ordinance that:

    (a) was made under an Act providing for the acceptance, administration or government of a Territory other than the Territory of Norfolk Island; and

    (b) has not become an enactment of the Australian Capital Territory;

    and includes a regulation made under such an ordinance.

    —————————————————————————————————

    Boof – to grow your own would see you fined up to $85,000 and sent to gaol for two years.

  16. James

    It’s the high price (i.e. the excise) that drives the black market, not the plain packaging. In fact there was a thriving market for chop-chop well before plain packaging came along.

  17. Memoryvault

    You can always grow your own.

    Fines notwithstanding, growing it is the easy bit, Boof – it’s a weed. Curing the leaf is easy enough too. However, turning the cured leaf into something that can be fashioned into a cigarette that can actually be smoke is another story.

    A group of us on the Sunshine Coast went down that road in the 1990’s (when it was still more or less legal), without much success.

  18. Gleambright

    Fockit we might as well make it an experiment. Lets give the luvvies what they want. Just totally outlaw ciggies. We’re 90 percent of the way there, now, so it won’t make much difference.

  19. Snoopy

    Fockit we might as well make it an experiment. Lets give the luvvies what they want. Just totally outlaw ciggies. We’re 90 percent of the way there, now, so it won’t make much difference.

    If the penalties for growing, selling and possessing chop chop then become the same as for dope, then in a weird way it would arguably be a more libertarian position.

  20. boof

    memoryvault, the chop chop mob still manage to turn out a palatable product, perhaps you should have taken some advice.

  21. notafan

    There is an American website that has lots of info called howtogrowtobacco.com.
    Must be legal in the US.

  22. .

    Please note my post at 1.42 pm today – I hope no cats, even the ones I snarl at get themselves into this sort of serious trouble under s 28 of the Excise Act 1901.

    I’m not sure many of us can afford an $85,000 fine and two years in gaol.

  23. Memoryvault

    the chop chop mob still manage to turn out a palatable product

    Yes, Boof. And the equipment they use to roll the cured leaves into compressed logs then finely slice them into strands, runs to tens of thousands of dollars. Fine for a million dollar bootleg outfit, but out of the ballpark for a backyard operation.

    I spent a couple of grand buying a variety of second-hand cutting, slicing and chopping machines, and modifying them, without even coming close.

  24. Memoryvault

    Just totally outlaw ciggies. We’re 90 percent of the
    way there, now, so it won’t make much difference.

    It would make an $8.5 Billion a year difference to the federal grubbymint in lost excise revenue, plus GST, plus all the licencing fees state grubyymints collect from the sellers.

  25. Lem

    Quite apart from the issue of plain packaging, and returning to the theme of the excerpt from Adam Smith’s book, what we know is that individuals will subvert law in order to fill a market need. For this activity to occur a means of exchange is required.

    Which is one of the reasons that central planners are moving as quickly as they can to destroy cash and replace it completely with digital money.

    Whilst digital money has many benefits, we should be very frightened of central banks and governments destroying the ability of individuals to trade between themselves freely without surveillance. And we should be very afraid of central banks having control over our electrons in space (which is what money is becoming) which they can arbitrarily with hold from the owners of the electrons, with all the hardship this can entail.

    In addition, what happens to your ability to trade on a daily basis when the banking system is crashed by power failure, or by cyber-terrorism? I find it a very scary scenario.

    Norway are at the vanguard of destroying citizens ability to carry a means of exchange.

    And the Germans are frothing at the mouth to take away your cash.

  26. Lem

    Sorry, I meant Denmark, not Norway, but heck they all look the same to me 🙂

  27. Squirrel

    “So what would a rational response be?”……exclude all smoking-related illnesses from coverage under Medicare and the PBS – it would be a step in the direction of self-reliance.

  28. boof

    memory vault, even my poor memory works to remember they used paper shredders.

  29. …exclude all smoking-related illnesses from coverage under Medicare and the PBS – it would be a step in the direction of self-reliance.

    And overweightness;
    And hazardous sport;
    And…
    Squirrel, I think that’s called the thin end of the wedge. Who defines weight? Who defines Hazardous?

  30. …and who will cop the tax now the system isn’t getting $8 Billion less from the smokers?

  31. Probably the drinkers… who will be written out of Medicare benefits.

  32. Memoryvault

    memory vault, even my poor memory
    works to remember they used paper shredders.

    Been there, done that, Boof.
    You end up with something like Corn Flakes, only smaller.
    Okay for a pipe (did that too) but impossible to roll.

  33. Dan

    which is packaged without health warnings

    Oh no!

    A durry in the U.S. is about a 1/4″ shorter than smokes here. I wouldn’t be surprised if they started selling shorter smokes as well as offering at a lower price. Consumer wins

  34. Eyrie

    Methinks our friend Kipling had more than a little sympathy for smugglers. “A Smuggler’s Song” and “Poor Honest Men”.
    Tobacco is mentioned in both.
    For a quick 3 minute precis of the illicit drug trade I recommend Glenn Frey’s “Smuggler’s Blues”. Made a great double episode of “Miami Vice”.
    Between Kipling and Heinlein (particularly “Double Star” and ” The Moon is a Harsh Mistress”) what more do you need to figure out the world as it really is?

  35. Eyrie

    Oh yeah, Piss off, Squirrel you fascist arsehole.

  36. Gab

    The tobacco industry has threatened to launch super-cheap cigarettes costing just $9 a pack in response to a growing black market in cheap, illegal tobacco, which health officials claim they are powerless to seize.

    But we were told there was no significant black market! Some even had a nasty pick at Sinclair over the matter.

    Lefties wrong again becuase they have no idea about human behaviour.

  37. wreckage

    Heh heh heh.

    6 months ago there wasn’t a black market and Sinc was stupid and wrong and it disproved everything else he had aver said.

    Now they’re panicking because there’s a black market, and Action Must Be Taken.

    Faaaaarrrrrk me, how many times can a person be wrong before they work out that they’re also stupid?

  38. nilk

    NSW Health has told a review of tobacco laws that its inspectors have detected increased sales of illicit tobacco, which is packaged without health warnings and is sometimes blatantly labelled “illegal tobacco”.

    At last, truth in advertising!

  39. Anto

    Just totally outlaw ciggies. We’re 90 percent of the
    way there, now, so it won’t make much difference.

    Yeah, great idea. Criminalize the 15%-20% of the population that smokes. Absolute genius.

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