A German story here from about a decade ago. The German tax folks and the anti-smoking crowd came to together for a two-phase approach. It was a fair-sized jump on the current tax at the time on smokes.
Well...roughly nine months go into this first step of the new tax, and there’s an emergency meeting of the German tax office. There’s roughly a quarter-a-billion dollars missing from cigarette taxes for that period. The anti-smoking folks were all happy, thus this showing that people quit smoking, but the tax folks were furious because they were short on the revenue bucket.
Then, the customs guys at the table stood up....strange thing...they announced. They had seen a drastic change in illegal cigarette cartons being smuggled into Germany. Teenagers were bringing in twenty cartons here and there. People had enough truckloads that they attempted to smuggle in....with no taxes on the smokes. They were busting people left and right.
So the tax folks got suddenly worried. The public had said enough, and simply found other sources for their smokes. They stopped phase two of the tax hike and hoped that people would stop this smuggling practice. Well...they never have. Smuggling cigarettes into Germany is as popular as ever.
The lesson here....is that you can only tax up to one single point and then the public will not accept it anymore. Once you screw up the tax game....your whole monopoly on taxes drys up.
All those cigarette taxes are goin' for smoking cessation programs riiiiight???
It's for the children doncha' know.
it could have been an incentive to get people to stop smoking — in that case, it has worked as, while it is possible to procure black-market cigarettes, it’s not as convenient as heading to your nearest convenience store.