42
TOBACCO OUTLET BUSINESS
MAY/JUNE 2013
Highlights
from the
AWMA Show
The STaTuSof Smuggling
The fact that increasing state and
federal taxes on cigarettes and other
tobacco products are having the
unintended consequence of higher rates
of smuggling, counterfeit smokes and
other criminal activity is not exactly news
to tobacco retailers. But as taxes continue
to rise, the numbers are growing more
alarming.
Research shows that in some states
tobacco tax revenue actually declines
when rates are raised—not because
more people are quitting as legislators
claim to hope—but because smokers
are purchasing smuggled cigarettes
from low-tax states. For example,
Massachusetts added a $1 per pack tax
and estimates now suggest revenues
will decline by 3.2 percent. Florida
went from a 22.9-cent tax to almost
$1.34 per pack and initial assessment
is that revenue will decline by 19
percent.
The illicit sales that account for these
declines in revenue are both casual and
professional smuggling, notes Michael
LaFaive, director of the Morey Fiscal
Policy Initiative, a researcher from the
Mackinac Center for Public Policy
in Michigan. “A casual smuggler is an
individual who crosses into lower tax
jurisdiction to acquire cigarettes for his
or her own consumption, whether it be a
lower tax state or an Indian reservation
or the Internet,” explains LaFaive. “In
fact, in Europe you’ll see ads directed
at American consumers that say, ‘We
are not allowed to report your business
with us to any tax authority’—basically
encouraging them to smuggle cigarettes.
“Commercial smuggling is long-haul,
large shipments for broad distribution
and is generally done by organized
crime because they need distribution
networks to make them work,” he adds.
“In addition to smuggling, high
tax rates cause other unintended
consequences,
including
brazen
and violent theft of cigarettes from
wholesalers and retailers,” added
LaFaive, who points out that in some
The 1,000-plus distributors, exhibitors and guests who gathered in Orlando for the American Wholesale Marketers Association’s
annual show enjoyed social networking opportunities, educational seminars and a show floor teeming with new product ideas. The
pages to follow offer key takeaways and highlights from the event.
