No illusions

There was a remarkably frank statement from Ireland's Minister for Finance, Michael Noonan, in a debate last week. Contrary to anti-smoking propaganda, he accepted that higher tobacco taxes mean more smuggling, more tax evasion and more illicit sales. But he has no plans to do anything about it. On the contrary, he supports plain packaging and accepts that the problem will get worse.

He said...

There is a real problem with tobacco. Much of it arises from the fact that ordinary decent citizens are buying illicit cigarettes and illicit tobacco, mainly for price reasons. As we continue to use price to discourage people from smoking, I think we will divert more and more of the trade to the illicit trade.

It sounds like a cliché to say that if people stopped buying illicit cigarettes, the trade would stop very quickly. The incentive to buy is related to price. Much of the illicit trade is driven by people posing as tourists to go abroad to buy cigarettes to bring into Ireland. People can check the Internet to find very cheap flights. They can use these low-priced flights to go to countries where cigarettes are much cheaper than they are in this country.

I have a suspicion that the legitimate trade is involved in the production of illicit cigarettes as well. People are able to buy very cheap cigarettes in other countries and bring them to Ireland. As they pass through the airports, nobody checks whether they are carrying more than 800 cigarettes. I accept that there are some spot checks and spot searches. Large amounts of illicit tobacco are being brought into this country by individual travellers who purport to be carrying cigarettes for personal use. If one examines the prices of some flights, one will appreciate how quickly a profit can be made, especially by those who are prepared to travel a couple of times a week. The crackdown will continue. The Revenue Commissioners are chasing this up. The major price incentive associated with buying illicit tobacco makes it difficult to stop this activity.

Another speaker in the debate said that "in 2011, some €707 million worth of illegal cigarettes were sold, which led to a loss of €258 million in excise duty and VAT to the State". He continued...

One of my concerns is that in parts of my constituency there is a strong sense that approximately 30% of the sales are illegal, and that figure is growing. That appears to be the case in other parts of Dublin and in cities such as Waterford, according to anecdotal evidence.

I will give the Minister a couple of examples. A small shopkeeper to whom I spoke in north Clondalkin told me he let two staff go recently because of a decline in the legal sales of tobacco. The reason is not that people have suddenly stopped smoking, although I wish it was, but the growth in the illegal tobacco business. A neighbouring shopkeeper told me approximately 30% of discarded tobacco packaging outside his shop is from illegal tobacco products. While it would be preferable if people gave up smoking all together, it is galling that businesses which pay their commercial rates and keep people in work are being undermined because of illegal tobacco.

The other side of this issue is that the illegal tobacco trade benefits the criminal fraternity. Retail Ireland believes criminals in Ireland make in the region of €3 million per week from illegal tobacco sales. The most insidious aspect of that is it sucks young people into crime and inevitably some of them go on to get involved in even worse things, such as heroin and cocaine.

Nevertheless, the message from Irish politicians is c'est la vie, we'll carry on. Because it's working so well, right?