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Black market tobacco claim unfounded, says Customs

Black market tobacco
The tobacco industry’s predictions of a black market fostered by tax rises seem to have been unfulfilled, apart from one significant seizure, official papers indicate.

The Customs Service says “no significant seizures of cigarettes” were made in the past three years.

This is despite industry assertions that tightening the screws on tobacco control will foster an illicit market.

The industry has been issuing these warnings about policies such as tax increases and plain packaging since the Maori affairs select committee tobacco inquiry in 2010, at which time British American Tobacco released a report it had commissioned, “Out of the Shadows”, on New Zealand’s illicit tobacco market.

Customs says in a summary of 2010, obtained by the Herald under the Official Information Act, that an increase in tobacco seizures, including illicitly grown local leaf, was identified as a possibility because of the tax rises that began that year, “… however despite the increases in excise duty this has not been the case”.
But Customs did seize 4.8 tonnes of unprocessed tobacco with an estimated market value of $500 a kilogram and an unpaid tax value of $2.6 million.

Two men were fined in June in relation to unlawfully manufacturing tobacco, following the 2010 seizure in Motueka, formerly an important growing area for the plant.

Customs says the illicit trade in tobacco and cigarettes “was generally confined to intercepts of one to two cartons – over concession – from passengers arriving into New Zealand and via the mail stream”.

There was evidence of individuals organising tourist groups or aircrew to import their full duty-free quota or more, then selling the products to local retailers but the trade “is not considered significant”.

There had been “organised” imports of cigarettes to various addresses linked through a common mobile number – but this was considered insignificant, as were over-quota amounts intercepted from crew members of commercial ships.

In a report on the latest tax-rise proposals, the Treasury said the risks of large-scale tobacco smuggling and illicit local manufacturing were comparatively low.

British American Tobacco spokesman Nicholas Booth said the illegal tobacco trade was a “very real issue” which cost the Government around $40 million a year in unpaid tax.

Plain packaging would cause the illegal tobacco trade to grow, he said.

But Action on Smoking and Health said the illicit trade was small. Its director, Ben Youdan, said the industry’s claims were “PR spin – it’s the worst kind of scaremongering”.

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