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Promoting lower taxes & encouraging cigarette brand differentiation

The libertarians are citing a Daily Telegraph article that claims to show that high taxes and plain packaging are increasing tobacco consumption and the size of the illegal tobacco market.  The basis of this newspaper report is, in turn, a KPMG report written for the tobacco companiesKPMG are trying to demonstrate that tobacco producers are “socially responsible” who seek to defend the government’s tax coffers and to stop citizens from smoking.

I’d prefer to describe them as mass murderers who have killed 40 million people over the past decade. Its a more accurate labelling.

The libertarians support big tobacco by promoting the central marketing line of big tobacco – smoking is an issue of “freedom of choice”.  The IPA that, in the past at least, has received funding from tobacco companies is concerned about plain packaging as a violation of property rights. Again this is a central claim of big tobacco.

Of course the incentives are to substitute illegal tobacco for legal tobacco as the price of the latter increases.   The issue is by how much. The answer given depends on the estimated size of the illegal market and there isn’t much data on this.  One certainly does not want these important issues analysed by those who are employed by these merchants of death.

KPMG wrote an earlier report on plain packaging (that was criticized in a paper I wrote with David Prentice).   The latest report (as well as the former report) seems unavailable (I couldn’t find them on the local KPMG website) but my hypothesis is that the estimated figure for illegal tobacco sales (based on a survey of discarded packets) is not an underestimate.

Very high estimates of usage – illegal KPMG claim 13.3% of the total market – seem implausible given the bulky low relative value character of chop-chop (illegal tobacco) and hence its comparatively high detectability.

The plain packaging moves don’t seem directly linked to the issue of illegal sales since plain packaging can be “plain” but still difficult to imitate.

Of course this type of research should be implemented by groups independent of the industry who benefits from lower taxes and the brand differentiation that stems from differentiated packaging.



*The libertarians are linked to the IPA, the Catallaxy blog and the rat-bag US Heartland Institute as can be seen from their Australian website.

9 comments to Promoting lower taxes & encouraging cigarette brand differentiation

  • Jim Rose

    an illegal market is a predictable response to high taxes and outright prohibition.

    the size of the illegal market is used by some as a reason for legalising various soft and hard drugs.

    I assume that growing tobacco on the sly in the backyard etc., is harder than growing dope.

  • conrad

    Off topic, but I think Catallaxy are now mainly post-modern conservatives, not libertarians.

  • hc

    Jim, I think tobacco is relatively easy to grow. You can buy seeds online from the UK.

    Conrad, The Libertarian blog does link to Catallaxy. I don’t think they are conservatives – they want change – get rid of the ABC, abolish most taxes etc.

  • Jim Rose

    on grow you own, I assume there is quality issues. also, people would have to grow a lot for a pack of 20?

  • John Mashey

    1) Tobacco companies have long appealed to Libertarians, ~1980s via “smokers’ rights” organizations, as easily can be found by a quick look at UCSF’s Legacy Tobacco Documents Library:
    (That’s the one with 80M+ pages of internal memoes and such.) That only gets 4,000+ hits.

    2) However, “smokers’ rights” groups really didn’t catch on, so they partnered with the Koch brothers to help foster the US Tea Party (which lately, is being spread outside US; I don’t know offhand about AU+NZ). See“>TEA Party: Tobacco Everywhere Always, which links to the (free) peer-reviewed research paper @ BMJ Tobacco Control. Most of the rank-and-file thinks that was purely a grass-roots movement. Wrong. Tobacco folks were talking about wanting a social movement by 1990, when the Tea Party theme was suggested, plus costumes.

    3) As described in Fakery 2, pp.37-45, the tobacco companies knew by early 1980s that they needed “replacement smokers” and the only way to addict children to nicotine while their brains were developing fast, to “wire” the addiction. People vary, but very few people start smoking after age 20, and the earlier someone is a regular smoker, the harder it is to quit. RJR noted this ~1984, including data that people often stuck with first brand, so it was not only important to get there early (ages 12-18), but get there before the competition. Joe Camel appeared in 1987, and likely helped move the typical starting age from 15-16 down to 13-14. Unlike opiate addictions (which can occur at any age), nicotine addiction is one that needs to be established early.
    Most adult smokers regret stating and try to quit, unsuccessfully, basically having been led into a lifelong damaging error during ages when people are prone to risky behavior.
    (If an adult is dumb enough to want to start smoking, let them … but nicotine is about children … and the best marketeers in the world know that.)

    4) The latest thing is e-cigarettes. Here’s an October 2013 symposium by experts, including videos and slides.
    Experts think that e-cigs are mostly less bad than cigarettes, but think that if all cigarette smokers switched to e-cigs, they’d be better off. The worry is that e-cigs will be used to avoid laws and get kids addicted to nicotine, hence chocolate and other candy flavors. E-cig vendors tout their products as helping people quit smoking. Maybe, but major tobacco companies are buying them. Among other things, they can get back on TV unless laws catch up. Here are 2 quick commercials:
    Jenny McCarthy: what audience is that for?
    Reynolds Vuse

    The gold rush is on.

  • Jim Rose

    smokers smoke because they like smoking. they stop when the risks outwigh the pleasures.

    I should be 10 kilos lighter. dieting and exercise is hard and of little pleasure to me.

    I lost 10 kilos when first told I had diabetes. I then hit a brick wall in the weight reduction department.

    I blame no one but myself and make no excuses about my lack of will power.

    btw, the craving for biscuits and sweet things never. never goes away. that is why I do not have them in the house.

  • rog

    Smokers smoke because they are addicted to nicotine, which is a very powerful mood altering drug. Nothing to do with willpower, smokers need medical help and support to end their dependence.

  • Jim Rose

    how many smokers give up without medical help and support?

    do many people need medical help and support to lose weight? surgery? drugs?

  • Jim Rose

    my father gave up smoking because he could not advise his patients to do so while having fresh butts in an ashtray next to him on his surgery desk.

    My mother gave up because her young children pestered her. It was 11 weeks before we noticed that she stopped and that eas because she had to draw her success to our attention.

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