Cigarette Smuggling and Crime/Terrorism


Patrick Fleenor, Chief Economist at the Tax Foundation, had an op-ed in the Boston Globe a few days ago which details the problem of high cigarette taxes leading to cigarette smuggling and other criminal activities. He concludes by saying, “Backers of the current hike argue that it will raise needed revenue while discouraging smoking. The first claim is myopic, since the tax imposes costs on society in terms of lawlessness. The widespread availability of cheap cigarettes via the black market also undermines the second.”
More disturbing, Fox News this morning has a story about how cigarette smuggling is leading to the funding of terrorist organizations. The story is based on a report prepared for the U.S. House Committee on Homeland Security titled “Tobacco and Terror: How Cigarette Smuggling is Funding our Enemies Abroad.”
Why is this an issue for Maine? Maine’s high cigarette taxes are an enabler to these smuggling activities. Maine’s recent increase in taxes on beer, wine and soda only serves to expand the menu of items that can be profitably trafficked by smugglers. The next time Maine legislators plan to raise these types of excise taxes again, they should keep in mind the conclusions reached by this study:
“Experts have long acknowledged that terrorist organizations such as Hezbollah ‘depend on a wide variety of criminal enterprises, ranging from smuggling to fraud to drug trade to diamond trade in regions across the world,’ including the United States. Terrorist organizations rely heavily on their global web of illicit enterprises to financially support their recruiting, training, arming, and operational objectives. As law enforcement agencies continue to combat terrorist and criminal fundraising schemes, these criminal groups will continue to adapt and exploit emerging vulnerabilities. The ability of these groups to engage in low-risk, cash-based schemes such as cigarette smuggling are critical to the continuation of their operations. The more than $50,000 in profits that smuggling rings can generate from one contraband load (1,500 cartons) is enough to fund as many as 10 USS Cole bombing operations. In just two months of illicit cigarette trade operations, a motivated terrorist cell could generate sufficient funds to carry out another September 11th style attack, in which operational costs were estimated to be $500,000.”