One lesson governments never seem to learn is that when taxes push the legal price of something high enough, a black market will eventually show up to collect the difference.
Australia is now getting a particularly ugly demonstration of that principle. After more than a decade of relentlessly increasing tobacco taxes in an effort to crush smoking, the country has created an enormous price gap between legal and illegal cigarettes, and organized crime has rushed in to fill it, according to the Financial Times.
A legal pack of cigarettes now costs close to A$60, or roughly US$42, making Australian cigarettes the most expensive in the world. Excise taxes account for more than 70% of that price, and the cost of legally purchased tobacco has roughly tripled since the end of 2016. Meanwhile, contraband cigarettes can be bought for around one-fifth of the legal price.
Charts: Financial TimesNot surprisingly, smokers have migrated to the underground market. Australia's tobacco regulator estimated that illegal cigarettes accounted for roughly 55% of the market last year, although other government estimates suggest illicit tobacco's share of consumption may be considerably higher.
Criminology professor James Martin estimates Australians spend about A$8.5 billion each year on illegal cigarettes and vaping products, roughly twice what the country spends on cannabis, cocaine, ecstasy and heroin combined. In practical terms, criminal organization
