June 12, 2021 7:00am by David Farrar

The massive tobacco black market

Auckland dairies are selling cut-price cigarettes imported and distributed by gangs as part of a vast and growing tobacco black market.

By increasing the taxation on tobacco to such high levels, successive Governments have succeeded in giving the gangs an additional income stream to complement P.

A smattering of dairies across the city, particularly in the east and south, are embroiled in the illicit trade.
Along with legal, taxed tobacco, they’re also offering packets of Asian-origin cigarettes to customers in the know, distinctive because they lack the plain packaging mandated by law in New Zealand.

What’s interesting about the black market is all three segments of it are booming. They are:

Theft: Every week a dairy gets robbed of cigarettes by organised crime
Illegal Imports: There are container loads of cigarettes being illegally imported by gangs and others
Local Growers: A boom in local growers who are selling on the black market

What these all have in common is no excise tax is paid on them. and no health warnings.

It is understood the dairy would likely have bought the packets for about $17 each, giving a margin of $5 profit per pack sold, compared to the margin of about $1-$2 made from legal cigarettes.

Gangs take less of a cut than the Government! The tax take is around $24 and gangs are wholesaling for $17.

Customs investigations manager Bruce Berry does not mince words when asked about the state of the tobacco black market.
“Yes, the scale … of the illicit tobacco market appears to be growing, and yes, there are common drivers to that.”
The size and sophistication of the market has increased dramatically in recent years, driven in part by skyrocketing cigarette prices thanks to rising taxes.

The tax increases worked up until they reached a level when they didn’t. They went that little bit too high, and the black market expanded massively.