One hundred Metro service stations shut for selling illicit tobacco sounds like enforcement working. On this Garage edition of the Court of Public Opinion, Jeremy Cordeaux read it the other way, as proof the government is chasing the symptom while ignoring the cause it built itself: the excise that pushes a legal packet of cigarettes to $60.
Why Pick On The Servos?
Jeremy’s first reaction was to question the target. A hundred service stations had been closed, he noted, yet the most common purchase point for illicit cigarettes, in his view, is the small tobacconist that has appeared in suburban streets across the country. You can walk straight in, he said, and buy them.
By illicit he was exact: cigarettes on which the excise has not been paid. Why enforcement fell on the servos rather than the far more visible outlets was a question he left open, but the implication was plain enough, the crackdown looked selective.
Follow The Money
The core of Jeremy’s argument was economic, not moral. Why, he asked, would anyone pay $60 for a packet when they can pay $12? Follow the money, he urged. When the legal product costs five times the black-market price, a black market is not a surprise, it is inevitable.
Even $12, he conceded, is bad enough, but people clearly are not paying anything near the taxed price. The huge gap between legal and illegal, driven almost entirely by excise, is what creates and feeds the illicit trade. It is, he argued, all about the tax.
The Policy Backfires
For Jeremy, this is a textbook case of a policy defeating its own aim. The tobacco excise is justified partly to discourage smoking and partly as revenue. Yet, he noted, smoking is actually rising, and much of it is now supplied outside the tax system entirely.
That is the worst of both worlds. The government does not collect the revenue it imagines, because people buy untaxed product, and it does not cut smoking either. The main achievement of pricing legal cigarettes at $60, in his telling, has been to hand a thriving market to the black economy.
Treat The Cause
The lesson, for Jeremy, echoes his arguments on soft plastics and red tape: stop treating the effect and look at the cause. Raiding service stations addresses the symptom while leaving the driver, the enormous tax gap, untouched.
He was not endorsing smoking. His point was about coherent policy. When a tax is set so high it creates a bigger black market than the legal one, closing a hundred servos will not fix it. The honest fix, he implied, means confronting the excise itself, and the uncomfortable truth that the government’s own settings built the black market in the first place.
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.
