Jeremy Cordeaux has argued for weeks that the tobacco excise created the very black market it was meant to prevent. On this Garage edition of the Court of Public Opinion, he produced the numbers that, in his view, prove it: revenue crashing from $16.3 billion a year to about $4 billion, while illicit cigarettes now supply 80 per cent of the market.
The Collapse In Revenue
The figures were striking. The excise on cigarettes, Jeremy said, used to raise $16.3 billion a year. These days, with the illicit trade flourishing, that has dropped to around $4 billion. More than three-quarters of the revenue has simply gone.
It has not gone because people stopped smoking. It has gone, in Jeremy’s telling, because they stopped paying. Only about 20 per cent of smokers still buy the legal, taxed product; the other 80 per cent have shifted to the black market, where the government collects nothing.
A Policy That Achieved The Opposite
For Jeremy, this is the law of unintended consequences written in enormous figures. The government put the excise on, he said, for two stated reasons: to raise money, and for our own good, to deter smoking on health grounds. It has achieved, in his view, the opposite of both.
The revenue has collapsed, and smoking has not been stamped out; it has simply moved outside the tax system. Your policy, he said, addressing the government directly, created the illicit tobacco industry as it exists today. Far from solving a problem, it manufactured a bigger one.
Will They Cut The Excise?
The interesting question now, Jeremy suggested, is what the government will do about it. The obvious remedy is to cut the excise, narrowing the gap between legal and illegal cigarettes and making the black-market product less attractive.
He doubted it would happen, because it would mean admitting the policy was wrong. Governments, in his experience, are extremely reluctant to concede error; they would rather defend a failing approach than reverse it. Watching whether they cut the excise, he said, will be fascinating precisely because it tests that reluctance.
The Bigger Inconsistency
Jeremy could not resist a contradiction. If cigarettes are taxed so heavily for our own good, on health grounds, why is there no equivalent excise on fast food, when obesity carries so many health problems of its own? And why, he asked, will there never be a sugar tax?
His answer was that the health justification is, at least partly, a cover for revenue, and inconsistently applied at that. A simpler way to tackle obesity, he suggested, would be to put the Ozempic family of drugs on the pharmaceutical benefits list, if the government were fair dinkum. The tobacco excise, in his telling, is a case study in a policy that raised less money, cut no harm, and built a thriving illegal industry in the process.
Listen To The Full Episode
Catch the complete Garage edition of The Court of Public Opinion, recorded live around the dining room table.
Watch The Full Episode
The Court of Public Opinion streams live every Friday from 9 a.m. to 12 p.m. (ACST), right here at jeremycordeaux.com. Download the podcast anytime on your favourite podcast app, and join the conversation with your calls and comments.
