Whenever the Laffer Curve figures prominently in the wild, in my experience tobacco taxes seem to be disproportionately involved. Latest venue: Eire:
Finance figures showing that tobacco excise tax receipts are falling dramatically short of targets, even though [my italics] taxes have increased and the number of people smoking has remained constant at 29 per cent of the population.It seems that journalist Ms. O'Shea doesn't understand Laffer Curves either. That "even though" would be better as "probably because".
A couple of months ago I wrote of a similar Laffer Curve in tobacco taxation across US states. It seems that tobacco is an almost irresistable target for state and national governments to tax (everyone hates smokers, they're a minority of voters but sufficiently numerous to feel like taxing them brings detectable revenue) but it just doesn't seem to turn out the way that the politicians expect:
Counterfeit cigarettes can be brought to the Irish market at a cost of just 20 cents a pack and sold on the black market at €4.50. The average selling price of legitimate cigarettes is €9.20 a pack.Absent a massively increased risk for tobacco smugglers, I can't see how this situation is going to change for the benefit of the Eire government. If that cost figure is right, and a back-of-the-fag-packet calculation suggests it's at least plausible - though probably more like €0.4-0.5 - you're talking about 90%+ profit. No wonder 15%-20% of cigarettes in Eire are tax-free; I'm surprised it's not more.
While we're on the rule of unintended consequences, the article finishes with a warning from a former PSNI chief constable that the planned "plain packaging" rule for cigarettes could make life an awful lot easier for smugglers, and criminal gangs like the various IRA offshoots would significant beneficiaries. Something that a lot of people forget is that much of the IRA's funding came (and still comes) from criminal enterprises: protection, drugs, miscellaneous smuggling. Never mind drunken Americans in Irish bars in Boston, it seems that a fair amount of IRA funding is the result of government Puritanism.