We often discuss the fact that high cigarette taxes induce smuggling and associated crime, particularly if the taxes produce a premium that makes it worth going to neighboring states or the Internet. This apparently has happened in Bulgaria, reports Reuters:
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 taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. revenues from cigarette sales so far in 2010 have fallen by nearly a third.[…]
Overall losses from smuggling will probably outweigh tax gains as Bulgaria struggle to fight the growing black market, which has risen to over 30 percent of all cigarette sales and could cost 500 million levs in lost revenues this year, said Bezlov at the Centre for the Study of Democracy.
The full article here. More on cigarette taxes here.
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