Tobacco black market predicted

Government tax hikes on tobacco will hasten the evolution of a black market, Tauranga tobacco discounter Mike Lawrence warns.

Mr Lawrence, who has just changed the name of his Cameron Rd shop to Puff 'n Stuff, was responding to the Budget announcement that the excise tax on tobacco would increase by 10 per cent a year for the next four years, starting January 1.

It comes on top of the existing annual inflation indexed tax increases on tobacco, meaning the tax on tobacco was expected to jump by a further 48 per cent by 2016.

It will push the price of his most popular packet of 20 cigarettes from $13.20 to more than $20, something which Mr Lawrence predicted would hasten the evolution of a black market in tobacco.

He has already heard about an organised group selling packets of tobacco for $20 and he has personally been offered Asian-branded cigarettes from out of the back of a car for $70 to $85 a carton.

He was told they were legally brought into the country by family members but Mr Lawrence told them they were still illegal because they did not carry Government health warning labels.

"There is a black market out there and it's growing."

The mounting Government pressure on people to quit smoking has seen Mr Lawrence's business branch out into a cafe and gift lines. On July 22, every tobacco product will have to be hidden from public view.

He was bitter at how pre-budget hints had needlessly spooked Tauranga smokers into buying up cartons of cigarettes, so much so that he had nearly run out by the time the Budget was announced yesterday.

"It has been absolutely diabolical for the last few days."

The rundown of his stocks was not helped by major suppliers holding out in anticipation of a price rise from midnight. Mr Lawrence said that five minutes after the Budget was read out, he received a call from a supplier asking what he wanted.

In the lead-up to the Budget, he had been forced to restrict sales to one carton per customer, but not before one woman almost maxed out her credit card buying cigarettes. "A lot of people were spending a lot of money they did not have."

Labour's Sue Moroney welcomed the tax hike, saying that all the evidence showed it would lead to an immediate fall in the numbers of smokers. ASH communications manager Michael Colhoun said the Government had shown a fantastic commitment to reduce smoking.