Letter to Economist about smuggling
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|The Letters Editor
12th May 1999
The policy of sharply raising tobacco taxes is certainly good for health – people dorespond to the price signal. It is also good economic policy – why increase the taxburden on desirable activities like employment and investment, when revenues can be raisedfrom detrimental activities like smoking? The biggest mystery about tobacco taxationis why more European governments have not followed the British example, and steadilyraised tobacco taxes at above the inflation rate.
Tobacco companies have used the problem of smuggling to argue for a reversal of thispolicy in Britain, but there is nothing to suggest this will happen (The Belgian job, 8thMay). At the March 1999 budget, the Chancellor said: “Organised smuggling,which is now a 1½ billion pound a year racket, will not be permitted to undo a policy oncigarettes which successive British Governments have adopted for good and urgent healthreasons. As the Government strengthens its anti-smuggling strategy, we will target newresources to detect, prevent and punish this costly form of organised crime.”
Smuggling is a law and order issue and the Government is right to address it with lawand order measures. The economics of smuggling fail if the probability ofprosecution increases and penalties become more severe. It would be both spinelessand dangerous to reverse well-founded policies because of criminal activity.
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