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 companies. KPMG 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.