by Eliot Bakker
The nanny state regulations that help fill the coffers of our enemies.
In Pennsylvania last month, state representatives Russ
Diamond and Rick Saccone challenged a $1-per-pack cigarette tax increase
(which was later passed into law), arguing that the price hike would
regressively target poorer smokers and encourage black market sales.
More critically, the two lawmakers pointed out that increased sales of
smuggled tobacco would put more money in the pockets of violent
extremists who wish to do Americans harm.
That argument raised eyebrows in
the press, but the point made by Diamond and Saccone is a critically
important one. A major 2015 report from the State Department identified
tobacco smuggling as a major threat to national security, noting that
selling illegal cigarettes is a relatively “low-risk, high reward”
activity for criminal networks and terror groups, who often join forces
to exploit the illicit trade. The Pennsylvania representatives had
especially good reason to be concerned about their state’s exposure to
smuggling, since it sits on one of the most lucrative smuggling routes
in the country.
Cheap cigarettes from
Virginia regularly pass through Pennsylvania and Delaware on their way
to being illegally sold in New York and New Jersey, where high taxes
applied by liberal state governments have pushed smokers into the arms
of smugglers. Last year, a court in Brooklyn sentenced Basel Ramadan to
12 years in prison for his role as the ringleader of a major trafficking
ring that supplied Arab markets in New York and New Jersey. More
recently, Pennsylvania state troopers caught a man with 66,600 smuggled Virginia cigarettes in his trunk at around the same time Reps. Diamond and Saccone were addressing the legislature.
Overzealous lawmakers keen to boost tax revenues have always seen
smokers as an easy target. Liberal politicians and public health groups
argue that hiking taxes on tobacco products will cut smoking by making
the habit prohibitively expensive. The inconvenient reality, though, is
that there is little evidence small, incremental rises in tobacco
taxation have any real effect on smoking levels. In fact, a 2012 National Bureau of Economic Research paper found that tobacco prices would need to double to reduce adult smoking by just 5%.
Instead of cutting consumption, rising tobacco prices encourage poorer
smokers to look to the black market. Across the country, the Tax Foundation estimates that
smuggled cigarettes make up a substantial portion of tobacco
consumption – greater than 20% in some states. In New York, the illicit
tobacco capital of the US, smuggled cigarettes made up 58% of the total cigarette market in
2013, according to the foundation. In addition to putting their health
at risk by exposing them to counterfeit cigarettes, the influx of
consumers into the shadowy underground tobacco market also means their
money can end up in the hands of criminal groups and terrorist
organizations. In what might be the best-known such case, Mohamad
Youssef Hammoud is serving 30 years in prison for using millions of dollars in proceeds from tobacco smuggling to purchase equipment for Hezbollah in his native Lebanon.
Radical Islamist groups and other terror
organizations have long viewed tobacco smuggling as one of their most
reliable sources of income. Despite groups such as ISIL denouncing
smoking as un-Islamic and producing propaganda images of its fighters
burning piles of cigarettes, these organizations have absolutely no
qualms about funding their activities with money made selling illicit
tobacco to “kuffar” in the west. The leader of African militant jihadist
organization Al-Mourabitoun, Mokhtar Belmokhtar,
has been dubbed “Mr. Marlboro” due to his reliance on funds raised
through the sale of illicit tobacco. That money has allowed Belmokhtar
and his fighters to conduct deadly attacks on Westerners in Algeria, Niger, Mali, and Burkina Faso.
High tobacco taxation is having the same effect over in Europe. KPMG’s
latest snapshot of the illicit cigarette market in the EU, Norway, and
Switzerland found that nearly 10% of all tobacco consumed in the bloc
last year was illegal. One of Europe’s smallest countries, Malta, lost
€10 million ($11.15 million) in tax revenue to tobacco smugglers in 2015
alone. Some of the crooks-turned-jihadis behind some of Europe’s
shocking recent attacks – including last year’s Charlie Hebdo plot – traded in counterfeit cigarettes and used them to fund their activities.
Astonishingly, the European Commission recently decided to give up one
of its best weapons against the illicit tobacco trade – an
Anti-Contraband and Anti-Counterfeit Agreement with Philip Morris
International – because of pressure from activists over compliance with
the UN’s Framework Convention on Tobacco Control (FCTC). According to
the FCTC’s article 5.3, policymakers should avoid all
contact with tobacco reps – and while the article isn’t binding,
officials have been enforcing it religiously, even if it means weakening
their hand in fighting tobacco smuggling.
It’s no surprise that terrorists and organized crime groups are taking
advantage of the illicit tobacco trade. Profits are high, and selling
smuggled cigarettes is much safer than tracking weapons, drugs, or
people. Regressive tax rises on cigarettes bring in relatively little
money, have a minimal impact on overall smoking levels, and effectively
help fund the greatest threat Western liberal democracies has faced in
living memory – Islamist terrorism.
Eliot Bakker is a strategic consultant and American expat based in Brussels, where he advises American businesses operating throughout Eurasia on regulatory issues.
Source: http://www.frontpagemag.com/fpm/263713/terror-financing-and-black-market-cigarette-trade-eliot-bakker
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