Cash-strapped Bulgaria and Romania hoped taxing cigarettes would be an easy way to raise money but the hikes are driving smokers to a growing black market instead.
Criminal gangs and impoverished Roma communities near borders with countries where prices are lower — Serbia, Macedonia, Moldova and Ukraine — have taken to smuggling which has wiped out gains from higher excise duties.
Bulgaria increased taxes by nearly half this year and stepped up customs controls and police checks at shops and markets. Customs office data, however, shows tax revenues from cigarette sales so far in 2010 have fallen by nearly a third.
New York\’s Oneida Indian Nation moved a cigarette-manufacturing plant to their upstate reservation to shield smokers from steep taxes that Governor David Paterson has vowed to impose.
\”By moving the plant to the Oneida homelands, the Nation is availing itself of a long-settled law that recognizes the right of Indian tribes to sell products they manufacture on their own reservations without interference from state tax laws,\” tribe officials said in a statement.
It really is possible to set tax rates so high that revenue collected falls. The ways around the taxes might be illegal (and thus evasion) or legal (and thus tax planning or tax avoidance, to taste) but we can indeed spot that Laffer Curve out there in the wild.