Government efforts to tax cigarettes in Canada can have unintended consequences for tax revenues and the supply of contraband cigarettes, according to a report released last week by the C.D. Howe Institute. In “A Taxing Dilemma: Assessing the Impact of Tax and Price Changes on the Tobacco Market,” Concordia University economists Ian Irvine and William Sims assess the effect of tax policy on tobacco use and, in particular, on prices and consumer choice between illegal and legal cigarettes.

The study notes that sales of contraband cigarettes in Canada constitute a sizable component of the tobacco market. This illegal trade is associated with a loss in tax revenue and an array of illicit activities that involve gangs and organized crime.

Various policy responses have been called for to counter this state of affairs. Increased policing and controls have resulted in the market share of the illegal product declining significantly to about 20% in 2010 from about one-third two years earlier.

To assess the influence of different policy approaches to the problem, the authors model consumer choices under four policy scenarios:

Decreasing taxes on the legal product.
Boosting the price of the illegal product through an intensified crackdown.
A combination of the above.
Or, decreasing the price of discount cigarettes closer to that of the contraband product.
Among the researchers’ main findings:

Tax reductions on legal cigarettes would have only a modest effect on the share of the illegal product, cause a decline in tax revenues and result in a small increase in total consumption.
For tax policy to drive out the illegal market, tax reductions would have to be substantial. But such tax reductions would reduce tax revenues dramatically and increase overall consumption.
However, if the price of the illegal product could be raised with extra legal or enforcement pressures on suppliers, then the market share of the illegal product would decline.
“We emphasize that tax policy should be based not only on its impact on the total quantity of cigarettes purchased, but also on the social, legal and enforcement costs associated with the illegal supply,” note the researchers.

Tobacco users will have a harder time finding a place in Cohasset to buy nicotine products if Town Meeting sides with the Board of Health — and not selectmen or the Advisory Committee — on two tobacco-related bylaw changes. The Board of Health wants to stop pharmacies and any store containing a pharmacy from selling tobacco products. The board also has proposed adding electronic cigarettes to the list of tobacco products already banned from use in public places in town.

About 30 communities — including Walpole and Westwood, as well as Boston, Lowell, Springfield, and Worcester — have outlawed the sale of tobacco products in stores with pharmacies, according to D.J. Wilson of the Massachusetts Municipal Association. He said about 27 municipalities — including Hanover, Kingston, Taunton, Wareham, and Walpole — include electronic, or smokeless, cigarettes in their rules banning smoking in public places.

Wilson helped the Cohasset Board of Health write its proposed rules, which were championed by longtime board member and dentist Dr. Robin Lawrence.

“I’ve seen firsthand the result of tobacco products — patients who had half their jaw removed due to [cancer] as a result of smoking or smokeless tobacco — so I’m personally against all tobacco products, and I would do anything to reduce the amount of tobacco products being used,” Lawrence said.

He said he was disappointed that neither the Cohasset Board of Selectmen nor the town’s Advisory Committee supported the new rules. The boards especially object to the ban on tobacco product sales in pharmacies, saying it unfairly burdened specific stores, according to selectmen chairman Edwin Carr.

“We understand the intention of the Board of Health, and it’s incredibly admirable,” Carr said. “But we have to focus on the broader aspect. For me, it’s a commercial and economic development issue. Limiting people’s ability to sell goods is not something I was interested in supporting.”

Wilson said Boston was the first community in Massachusetts, in 2009, to make the connection between tobacco and its sale in health-related businesses like pharmacies. “If you’re providing medical advice, you shouldn’t sell tobacco, because tobacco kills and you’re trying to save” people, he said.

He said that about 300 businesses are affected statewide by the prohibition, including major grocery and drugstore chains. In Cohasset, the ban would affect three businesses — Walgreens, CVS, and Stop & Shop — according to health inspector Tara Tradd.

“It’s a trend of thinking in public health,” Tradd said of the proposal. “It’s confusing to go to a [pharmacy] and get good advice on taking your inhaler correctly [for example], and then be able to buy a product [there] that causes respiratory illness.”

California voters will decide next month whether to increase cigarette taxes by $1 a pack, primarily to fund research on cancer and other tobacco-related illnesses. If the excise tax on cigarettes and other tobacco products is approved, it would be the first increase for smokers in 14 years, after dozens of failed attempts in the Legislature and a defeat at the ballot box in 2006.

The American Cancer Society, the Lance Armstrong Foundation and other nonprofit health organizations have raised about $4.7 million to back the measure, while tobacco companies have shelled out nearly $40 million to defeat it.

Proposition 29 would raise an estimated $810 million a year, according to state officials, and give California the 16th highest tobacco tax in the nation. The Golden State currently lags behind 32 states in its per-pack tax and is one of just three states that have not raised taxes on smokers in the new millennium.

“Raising the price has been shown to be the single most effective way to deter people from smoking,” said Jim Knox, a vice president at the American Cancer Society’s California division. “Smoking among teens, which has been going down in California for a long time, leveled off in 2004 and is showing signs of going up. … Public health experts tell us that $1 a pack increase will prevent 220,000 kids from ever beginning to smoke, prompt 100,000 adult smokers to quit and prevent over 300,000 premature deaths.”

Since any price increase tends to curb demand, the measure would dedicate some of the money it raises to backfilling any losses in other tobacco-tax-funded programs – estimated around $75 million a year – and use the bulk of the remaining $735 million to fund new research and research facilities. Some money would also be dedicated to tobacco cessation programs and law enforcement efforts targeted at illegal tobacco sales.

Distribution of the research funds would be overseen by a committee made up of directors of cancer centers, University of California chancellors and at least one person who has suffered from a tobacco-related illness. Knox said the board is modeled after the respected National Institute of Health’s system, which awards grants and loans after a peer-review process.

But the committee has come under fire by opponents of the tax increase, including the California Taxpayers Association. Spokesman David Kline said the measure would create “a new state bureaucracy that really isn’t accountable to taxpayers.”

Kline also argued that the state doesn’t need to fund research on tobacco-related illnesses, noting that the federal government already spends $6 billion a year on the same thing.

“We support cancer research and want to find a cure as much as anyone else, but at a time that California is really struggling to pay the bills and keep the lights on, we don’t think it’s a good idea to duplicate federal spending,” he said. “Per capita cigarette consumption is already going down consistently. … We don’t think it’s necessary to use a tax structure to try and correct a problem that doesn’t exist.”

Knox, however, said it’s increasingly difficult for researchers to secure federal funding, saying that just 10 to 15 percent of qualified projects receive NIH funding these days – down from 70 to 75 percent 30 years ago. The Centers for Disease Control estimates that about 40,000 Californians die each year from smoking-related diseases, he said, at an estimated cost of $16 billion annually, from health care and lost productivity.

“If we were to capture all the costs of tobacco, we would have to raise the tax by $10 or $15 a pack,” he said. “You have out-of-state tobacco companies draining billions of dollars out of the state in profits every year.”

He cited a UCSF study projecting that if the measure passes, $804 million that would have gone to those out-of-state companies each year will stay in the California economy.

Kline, however, said the measure could also result in taxpayer money leaving the state, because it does not prohibit the oversight committee from awarding grants to research institutions outside California.

Knox rejected that notion, noting the state’s multitude of world-class research universities and the fact that the oversight committee will be dominated by university and research leaders from California.

“You have to pay attention to who is making these charges,” he said. “Every cent of the No on 29 campaign has come from out-of-state tobacco companies. … The tobacco industry has a long history of lying to the public.”

Kline said his organization and others opposed to the measure are independent of tobacco companies and believes the tax is “just a really bad long-term budget strategy.”

A Taunton man suffering from a late night craving was arrested early Thursday morning after smashing through the front door of the Country Store in Foxborough and stealing cigarettes and candy bars. Edward Cowen, 25, of 18 Rockland St., is facing several charges, including breaking and entering, after he allegedly broke into the Country Store located at 212 North St. around 2:19 a.m. on Thursday. Police in Foxborough responded to the scene after receiving a phone call from an alarm company.

When they arrived on scene, they observed that one of the front glass doors had been smashed. However, there was no sign of a suspect.
Surveillance video obtained from the store showed the subject smash the front door and head to the counter area where he proceeded to steal several packs of cigarettes. The subject then placed a $5 bill on the counter and stole several candy bars.
Officers found a suspect near Patriot Place that matched the description of the subject in the video and took him into custody.
Cowen will be arraigned at Wrentham District Court on Thursday.

A Bedford man accused in a regional cigarette theft conspiracy was convicted in a jury trial here Tuesday. Keith Lamont Hill, 55, is not a typical thief. Tuesday’s trial was not a typical jury trial. Hill’s case drew attention as his capture relied heavily on the warrantless tracking of his movements by a GPS device attached to his car in the 2010 investigation. A Supreme Court ruling in January in a similar case ruled the placement of such a device falls under the Constitution’s protections against unreasonable search and seizure.

Hill will not get the benefit of that ruling, at least not now.

He also drew attention because he unhesitatingly insisted on serving as his own lawyer — now with a 0-4 record. Charged in cigarette theft cases in Botetourt, Franklin and Campbell counties and the cities of Salem and Lynchburg, he now stands convicted in all but Lynchburg.

Before the January Supreme Court ruling, judges in all but Campbell County and Lynchburg ruled the placement of the GPS tracker did not require a warrant. Existing case law said the placement was not a search or seizure as long as the device was placed while the vehicle was parked on a public street. Since January, the remaining two judges have ruled investigators acted in good faith and while a warrant may be required now, it wasn’t under the law two years ago.

He appealed those decisions in the earlier cases and plans to do as much with this one, he said Tuesday.

Hill came under suspicion in late 2010 when investigators, starting in Botetourt County, began noticing a pattern of cigarette-theft crimes at grocery and convenience stores. In all cases, the perpetrator would cut a hole in the wall of the store and take nothing but cigarettes. On Sept. 27, 2010, less than two weeks after investigators put the GPS tracker on his car, the Campbell County Sheriff’s Office got a familiar call.

In her testimony before Tuesday’s jury, Nancy Franklin described her surprise when she came to work that morning to open the Food Lion supermarket just south of Lynchburg on U.S. 29.

“There was a big hole in the side of the building,” Franklin, the store manager, testified. “I could actually see inside the building.”

Nothing was missing, save 180 cartons of cigarettes, she said.

Meanwhile, Lt. John Mandeville of the Botetourt County Sheriff’s Office was on his way to Rustburg to meet with others working the regional investigation. With him, he carried a report of every location Hill’s car stopped for the last 11 days.

Mandeville’s information confirmed the car had been sitting in the vicinity of the Campbell County supermarket for a little more than an hour around 2:30 that morning, he testified.

A traffic stop outside Hill’s home in Bedford a few hours later yielded 12 large trash bags containing 180 cartons of cigarettes hidden in the back seat and trunk, Campbell County Investigator Tracy Emerson testified. Hill later confessed to the theft in a videotaped interview played for jurors.

Stripped by earlier rulings of his main defense, the GPS tracking was illegal, and his secondary defense, Botetourt deputies were outside their jurisdiction when they put the tracker on his car in Bedford, Hill was left trying to place doubt in the minds of the jurors.

Although Franklin testified Hill did not have permission to either punch a hole in the wall or steal cigarettes, it was possible, he argued, another employee gave him permission without her knowledge.

“Things like that happen,” he told the jury. “They happen from time to time. You can’t rule that out.”

Commonwealth’s Attorney Paul McAndrews responded with a smirk that although his responsibility was to rule out reasonable doubt, it was not to rule out all possible doubt “because we haven’t proven that some employee didn’t say, ‘Come knock the wall down and steal $6,000 in cigarettes.’”

Jurors spent an hour deliberating before convicting him of burglary, grand larceny, possession of burglary tools, conspiring with a lookout, and a misdemeanor charge of destruction of property.

Jurors are set to return this morning to consider a sentencing recommendation.

The Maori Party is pushing hard for an increase on the tobacco excise tax, but the Government is remaining tight-lipped on its plans. Maori Party co-leader Tariana Turia said today that her party would do whatever it took to make the country smoke-free. “We know that excise has been the best way, to date, at preventing the uptake. It’s worked extremely well,” she said. “I would like to be confident that there might be more, but I don’t know whether there’ll be a greater increase at all, that hasn’t been told to us.”

Mrs Turia said while some people saw smoke-free New Zealand as a pipe dream, that had to be the ultimate aspiration.

“At the moment, we have 5000 people dying a year, 13 people a day, I can not understand why we continue to allow a product that kills to be sold in this country.”

Mana Party leader Hone Harawira also supported the proposal for a further increase, praising Mrs Turia for the work she had done on the issue.
The Government has brought in three 10 per cent increases to excise duty tax on tobacco since 2010 – the most recent on January 1, when the tax jumped to 14.5 per cent.

Prime Minister John Key was today positive about the effects of the previous increases, but would not give away any clues about whether the May 24 Budget might have more in store.

“We’ve raised excise before, it’s been very successful in raising revenue and also in terms of reducing the numbers of people smoking, I think that’s been a good thing,” he said.

“The Maori Party have lobbied us hard to make further changes, but you’ll just have to wait and see until May 24.”

Finance Minister Bill English was also quiet on the matter, saying “I’m not ruling anything in or anything out”.

Zimbabwe’s contracted tobacco farmers commended Chinese firm, Tianze Tobacco Company, for its continued support of tobacco growing in the southern African country, which led to an increase in production output of the golden leaf this season, state radio reported on Tuesday. Out of the 13 tobacco contracting companies which are operating this season in Zimbabwe, Tianze Tobacco Company, which contracts more than 250 growers, continues to lead in both the seasonal and daily average prices.

Farmers contracted to the company hailed the support they received, saying the inputs and financial support have boosted the production of the golden leaf tremendously.

“We applauded the way Tianze is operating as well as the favorable prices that it is offering, though we feel they should now increase their prices,” a tobacco farmer told ZBC News.

Tianze, which has to date bought more than 4.2 million kg of the leaf valued at 17.5 million U. S. dollars, is offering the highest seasonal average price of 4.14 dollars per kg and a daily average price of 4.61 dollars.

With an average price of 4.05 dollars, Northern Tobacco Company emerges as the second highest buyer, while Tribac, whose prices are pegged at 3.92 dollars, are the third.

The Tobacco Industry and Marketing Board (TIMB) this season licensed 13 contract companies.

These companies partnered tobacco growers and assisted them with inputs and financial support among other things.

The contract system now accounts for 34.2 million kg of tobacco valued at 132 million dollars.

The very first cigarette tax in the nation was imposed in 1921 in Iowa. It was 2 cents a pack. Cigarette taxes have gone up a bunch since then. Massachusetts now has the highest rate — $2.51 a pack — and supporters of a health-care bill there hope to boost it an additional $1.25 this spring. Illinois’ tax is 98 cents a pack, 32nd highest among the states. Gov. Pat Quinn wants to raise that by $1 a pack to generate about $3 38 million a year for Medicaid. The new revenue would be matched dollar for dollar by the federal government.

Nobody likes tax increases. But this is one that makes sense, and the Legislature should approve it.

Arguments against cigarette taxes fill the air like cigarette smoke in an elevator. Critics say it’s a nanny tax, an example of government using its power to tax to steer citizens in a desired direction.

They say it hurts small retailers. When an Illinois smoker drives to Missouri to buy smokes, where the tax is 17 cents a pack, Illinois businesses lose not only that cigarette sale, but also the sale on gasoline, liquor, groceries and whatever else the smoker buys.

The number can be significant. When Cook County doubled its cigarette tax to $2 in 2006, cigarette sales at one Riverside gasoline station plummeted from 110,000 packs a month to just 17,000.

The Illinois Retail Merchants Association says the state already is battling a problem of unregulated counterfeit cigarettes on which no taxes are paid. And the association predicts that after an initial revenue bump, the tax increase would generate less and less net revenue.

Republican legislative leaders oppose any tax increases. “A cigarette tax, even if that’s one that’s not offensive to many people, is a revenue solution to a spending problem,” Senate GOP Leader Christine Radogno said Friday. “And that’s a philosophical difference between our parties.”

The critics overlook more important facts.

First, a tax on cigarettes will deter smoking. The American Cancer Society estimates the tax increase would stop 72,700 children in Illinois from becoming smokers and encourage 53,400 adults to quit. That’s no small accomplishment, given how terrible smoking is for our health.

Second, smoking-related health-care costs drive up Medi­caid spending, a fact Gov. Quinn emphasized when he met with the Sun-Times editorial board Friday. Smoking is estimated to cost the state $4.10 billion a year in health-care costs — and $1.5 billion of that tab is picked up by Medicaid.

“This is a very big public health measure,” Quinn said, “and anyone who is involved in public health is all for this.”

Third, trying to balance the state’s Medicaid budget with cuts alone means walking away from federal dollars. No other tax offers that huge federal match.

Fourth, Quinn already is proposing 58 stunningly deep Medicaid cuts. Further cuts would be devastating.

Fifth, the last three Republican governors of Illinois backed cigarette tax increases five times.

Radogno and the House Republican leader, Tom Cross, have voted for a cigarette tax increase, too.

It’s time they do so again, and bring their party with them.

Are we, or are we not, a just and compassionate society?

If you haven’t yet seen a commercial featuring a doctor dressed in doctor’s garb urging you to vote ‘no’ on Prop 29, a $1.00 tax on cigarettes and other tobacco products, then you will. If you watch any amount of television, you will. The group Californians Against Out of Control Spending/Taxing has spent nearly $900,000 on tv ads on local stations; KUSI, CBS, NBC, and the three major cable providers; Cox, DirecTV, and AT&T.

“I’m against smoking,” the woman says inside a doctor’s examination room. “So, I thought Prop 29 was a good idea. It raises $735 million dollars in tobacco taxes but not one penny goes to new funding for cancer treatment. Instead, it creates a huge new research bureaucracy with no accountability, run by political appointees who can spend our tax dollars in other states.”

The group is funded by tobacco giants Phillip Morris, RJ Reynolds, and affiliated companies Santa Fe Natural Tobacco Company, and the American Snuff Company. According to campaign finance records available on the California Secretary of State website, the group raised $12,088,658.65 in contributions from January 1 to March 17. So far, it has spent $7,945,264 with $4,531,467 in the bank.

The vast majority of commercials are set to run later this month and will run until early-June. And apparently, the group is banking on an anti-tax message, targeting adults 35 years of age and older. The ads will run during the NBA playoffs, NASCAR events, on FX, USA, CNN, Bravo, and during Lakers and Clippers games.