One really must marvel at the ability of governments to chase their tails.
Jack up the taxes on something to the point where the risk adjusted price of the alternative is compelling and then, first act surprised and second seek to increase the risks of the alternatives.
Australia has amongst the highest cigarette prices in the world. Possibly the highest. Spartacus is not a smoker, but suspect there are those in Cat land who have a view.
Because of the high cost of cigarettes in the “regulated” market, the “unregulated” chop-chop has flourished. The response of the government to this threat, not to health, but to a loss of tax revenue is to claim that chop-chop is more dangerous than regular cigarettes and to throw tax compliance resources at the market.
Thus, in last night’s budget, the government announced it is creating the Illicit Tobacco Task Force. This taskforce will co-ordinate Operation Fag-Off and will seek to
recoup more than $3.5 billion by compelling tobacco importers to pay excise on point of importation.
Separate to this major government announcement, Australia’s own hedge fund manager John Hempton posted yesterday on his blog of his analysis of a company called Swedish Match. This is what Hempton wrote:
Swedish Match (a tobacco company with no cigarette brands) owns the world’s biggest match and lighter business.
Redheads and Cricket (part of the Swedish Match product portfolio) are totally dominant in Australia.
you are seeing 11 percent volume decline for matches, 23 percent decline for lighters. If you are a big tobacco investor your only reaction has to be oh f–k.
Spartacus’ message to the Illicit Tobacco Task Force is good luck with that $3.5 billion. Just don’t come back saying you did not have enough powers or resources.
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