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June, 2008

BMJ

Regulation: Again and Again

The wheel keeps turning, over and over, coming to the same place, time and again: more regulation, more problems, more regulation, more…

For various reasons, food prices are rising the world over, putting the hardest toll on the inhabitants of the world’s poorest locales where any change in the price of food price can mean the difference between eating a meal or not. There have been “food riots” from Haiti to Bangladesh to Egypt. To avoid the chaos, the Jordanian government has recently announced it will lower duties on foodstuffs, but will compensate state coffers by raising the duties on “luxury items” such as tobacco products and alcohol. Duties will rise from 100% to 150% on imported cigarettes, up from 80% to 150% (!) on cigars, while the custom levies on raw tobacco will increase from 60% to 75%.

Since announcing the price hikes, Jordanian authorities have found that some retailers are already taking advantage of the situation, raising prices on these luxurious cigarettes before duty hikes officially go into effect. The authorities are promising that any shopkeepers caught overcharging smokers ahead of the duties going into effect would be fined as much as US$750 or “imprisoned for multiple offences.” This type of inspection and regulation will, of course, cost money. The Jordanian state will have to pay more in the form of inspectors and any legal ramifications. This is state money that will have to be raised from somewhere…and then surely we’ll soon find ourselves in the same situation again.

When facing the choice between the availability of either tobacco or food, food is obviously the winner every time. This is a no-brainer. But there will always be a humanitarian crises or, in the least, a pressing issue somewhere within every state - problems, which the more heavy-handed governments will look to solve (or at least gloss over) with some form of action. And government action takes money. And, of course, when seeking more funds, governments often look to scapegoat industries first to squeeze cash out of. However, these very “problem-solving” activities can have a problem-causing effect by stifling tangentially tobacco-related (and job-producing) industries as well helping to chase away an educated professional middle class who will go to other countries where “luxury items” are more available, and entrepreneurial opportunities less put-upon. It’s the continuing cycle of regulation, a cycle tobacco usually finds itself on the wrong side of.

- Evan D. Dashevsky


Tobacco International - June, 2008

Essentra


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