January 20, 2017 4:00pm by David Farrar

Black market tobacco a growing problem

There is a high risk New Zealand’s tobacco black market could grow significantly, costing the Government over $10 million a year, a declassified document says.

A Stuff investigation last year, which included a reporter purchasing 80 grams of the illicit product, highlighted how easy it is to buy illegal tobacco online.

Police have also raised concerns the black market is fuelling armed robberies and burglaries in Christchurch.

This shows the problems of increasing taxes on a product. There comes a point where more and more people turn to the illegal black market.

Increased excise taxes on tobacco are and have been an effective way of reducing the numbers who smoke. I’m supportive of them. But tax alone won’t do it. If you keep increasing the tax, you’ll keep growing the black market.

The document outlined a possible scenario in which the market could reach a “tipping point” – where illegal tobacco is so much cheaper than legal tobacco that the market begins to boom.

It goes like this: increasing tobacco thefts, illegally imported tobacco, and sales of home-grown tobacco lead to an increased illicit supply.

The increased supply causes the price of illegal tobacco to drop.

The black market increases as cash-strapped smokers turn to illicit sources, therefore making New Zealand an attractive destination for illicit tobacco imports.

This is why the Government can’t rely on tax increases alone and should look to make reduced harm products such as e-cigarettes easier to purchase than normal cigarettes.

Media coverage suggested the black market tobacco trade is booming across the ditch, with reports it is worth more than $1 billion.

Organised criminals are attracted by the huge money at stake and the softer penalties compared to those for importing and dealing drugs.

Customs estimated that black market tobacco made up 2 to 3 per cent of the New Zealand tobacco market, compared with Australia where it was over 14 per cent.

So the question is how do we avoid the Australian experience?

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