International Trade Post author By Philip Lane Post date September 2, 2013 Jamie Smyth writes on the lreland/UK cigarette smuggling phenomenon in today’s FT Analysis page. Categories In Uncategorized 29 Comments on International Trade ← Back to School → Paying Paul and Robbing No One: An Eminent Domain Solution for Underwater Mortgage Debt 29 replies on “International Trade” (1) “It takes barely a minute to find a woman among the stalls calling out “tobacco”” (2) security services [who] say that the contraband is funding terrorism Is it Garda corruption or Garda incompetence which prevents them acting against the Moore Street sellers of contraband tobacco? Commissioner Callanan hasn’t asked for additional resources, and profits from selling contraband fund the Real IRA, you know, the people who kill policemen and “tax” the narcotics trade. So, is it Garda corruption or Garda incompetence? But how stupid would the Gardai have to be, not to to be aware of contraband cigarette selling on Moore Street? It takes Jamie at the FT “barely a minute” to find a seller. Surely, no Garda is that incompetent that they can’t detect this activity. So, if they’re not stupid, who in the Gardai is getting paid off? Would bribes need be paid to superintendents or the chief superintendent? What about the rank-and-file? And how much would the Real IRA have to pay the Gardai so that they’d turn a blind eye? Would €250,000 a year sway a chief superintendent? You’d hope not, but if it’s not incompetence or lack of resources which prevents policing of Moore Street, then what? … from the neo-classical perspective [is this a first?] – entirely ‘rational’; the locals pay out for the most expensive fags in the EU. empirical fact puff puff puff Is this the real Jagdip or an imposter? Rosie Hackett Bridge. Nice one! @Tull are you the real [tullmcadoo] or an imposter? Or has your ego doubled in size in anticipation of the return of the ‘grate pee-dee one’? @junior hospital doctors Right on. They would not have put up with it in 1913. Might hold out for a reasonable career path as well. DOD, Never voted PD. Too close to FF 4 me. Would have preferred bridge was called after true Dubs like Kay Mills or Willie B rather than jimmy hoffa sorry Larkin pal. Is alleging widespread Garda corruption new SF policy. At least it is an improvement on shooting them. I walk through Moore Street every day and have the stock phrase “no thanks luv” ready. Tobacco! Tobacco! is like some strange mating call I even think it is repeated ad nauseam by those that are not selling. The deliberate incompetence to deal with bankers, drug dealers, tobacco sellers is no surprise to those of us who live in the real world. If the Gardai moved in on the fag sellers there would be a massive hue and cry from the usual lefties about persecuting aul wans. Blind Biddy would have a seizure, @Tullmcadoo Tull McAdoo What a relief! No need to send in the head doctors – the one is as regularly reactionary as the other – we can move on. Tutorial XXVI On policy: Go to: http://www.sinnfein.ie/ insert the word “policy” in the search box; press return. Took me about three seconds. Ditto for the other political parties [except the PeeDees of course] p.s. Blind Biddy only smokes ‘electronic’ and ‘good stuff’ these days and only in the company of the One-eyed Shia Sheik for cultural reasons. Beirut is lovely this time of year … The Gardai do not act in Moore Street as there are very limited punishments for selling illegal tobacco. It is hardly worth the effort. This is small potatoes compared with the failed ‘war on drugs’ and VAT carousel fraud, including an Ireland-UK trading angle. The participants in VAT fraud tend to be more white collar and for example in 2011, a former policeman and two other men admitted conspiring to cheat HM Revenue & Customs [HMRC] out of £300m. As far back as the late 1990s, UK revenue losses from what is termed Missing Trader VAT fraud were growing by up to three quarters of a billion pounds each year. By 2001/2002, it was costing the UK taxpayer up to £2.75bn and it has made some Irish people very rich. In the first half of 2002, the category “Electrical Machinery (apparatus, appliances and parts)” in Irish trade statistics was inflated by more than €8bn in respect of both import and export trade with the UK. The HMRC detected carousel consignments of computer chips shipped to Ireland in the first half of 2002 large enough in aggregate to have supplied the entire market for that chip in Europe, Asia and Africa put together. The fraud relies on bogus trade in high-value, low-volume consignments like computer chips and mobile phones. In carousel fraud, the same consignment of goods is sold through a series of contrived transactions back and forth between EU member states, to steal the sums charged as VAT every time the goods go around the circle. In December 2005, Munich’s Ifo Institute estimated that Germany’s annual VAT losses were €17bn ($20bn, £11.5bn) a year, or 12% of total receipts, including €3.5bn lost to so-called carousel schemes operated by crime rings. Losses in Europe were estimated at €60bn a year, equivalent to more than half the EU’s annual budget. EU finance ministers met as recently as last June to try and tackle the fraud. “VAT fraud in Europe costs literally billions if not trillions and action has been awaited for quite a long time now, and we have got that particular one over the line,” Michael Noonan, Irish finance minister, told reporters in Luxembourg. @All Surely however at the local level the basic question is why this happens in the first place and the answer almost always is – its the price stupid ! We have had a proliferation of washed diesel finds in the border regions and indeed further a field at precisely the same time Govt has gone on a taxing binge. Normal, what could be described as, law abiding citizens simply cannot afford to pay additional carbon taxes and additional excise duties on petrol and diesel when they are being hammered on everything else. Something’s got to give and that give is in the public’s fear of being sanctioned for the actions and taking a chance at buying the cheap alternative. Who can really blame them? The cigarettes issue is the same story – albeit with a health related twist – but it boils down to economics at the ground level. Govt has brought a lot of this heat onto itself and its questionable if its being worth the effort as VAT/Excise receipts, despite the recent rate increases over the past number of years, have failed to deliver the expected additional revenues and the leakages continually grow as the public seem unconcerned with the criminal consequences of their actions. In simple terms needs must. A lot of this is preventable if the product is priced properly – with c80% of the cost of diesel, petrol or cigarettes going back to the Govt the powers seem on the face of it to have got the pricing wrong. Ronald Coase died yesterday. He was 102. “Fowler also collaborated fruitfully with Coase and another LSE colleague, (Sir) Ronald Edwards, Chairman of the Electricity Council, in the work of the Accounting Research Association on how the figures assembled for the balance sheets of companies could be used for economic research as a guide to the opportunity cost of resources used in production” There were three Ronnies at the LSE during Coase’s time–Ronnie Edwards,Ronnie Fowler and Ronnie Coase who subsequently won the Nobel prize in Economics. The Three Ronnies “William Baxter was to return regularly to the LSE over the next few years and got to know the young colleagues that Arnold Plant was gathering around him. These included Ronald Edwards,and Ronald Coase and Ronald Fowler-as Baxter commented ‘the name Ronald seemed to guarantee excellence” fyi United Kingdom: ‘Vodafone’s £84bn tax avoidance bonanza’ 3 September 2013 Presseurop The Independent UK-based telecommunications firm Vodafone is to sell its stake in US mobile phone company Verizon netting £84bn (€99.2bn), but none of this will be eligible to be taxed by the British taxman, complains The Independent. While US tax authorities will claim a £3.2bn slice, Vodafone reports that its US division is owned by a holding company in the Netherlands and so will avoid paying UK tax. Gains from the sale would also appear exempt due to a 2002 law on share sell-offs http://www.presseurop.eu/en/content/news-brief/4107961-vodafone-s-84bn-tax-avoidance-bonanza Cartoon of the Month ….Yawnnnnn Germany: The duel 3 September 2013I Kathimerini Athens http://www.presseurop.eu/en/content/cartoon/4110271-duel @ YoB: ” … law abiding citizens simply cannot afford to pay additional carbon taxes and additional excise duties on petrol and diesel when they are being hammered on everything else” These ain’t ‘law abiding folk’. They are accessories to a felony! However, I empathize -slightly, with you main point. “The Govt the powers seem on the face of it to have got the pricing wrong.” Its not the pricing that’s the problem, its the principle. Its the taxing of addictive products or proscribing them. We lack wise, educated and clear-headed political thinkers – rather than the biased, ignorant, party ideologues we are saddled with. Its great to know that one is Right! Actually, its the IFA’s fault. They demand cheap, marked fuel. We have our own cig factory. Just sell them slightly above marginal cost. That’ll show those pesky smugglers! 😎 “A survey by KPMG on behalf of Philip Morris found that the rates of illicit cigarette consumption in 2012 were 19.1 per cent in Ireland and 16.4 per cent in the UK in 2012.” I often wonder how these surveys are done. Do they stop people in the street and ask what they are smoking? @BW Snr Sorry Brian I disagree the problem here is in fact price. If the tax wedge was reduced the normal Joes wouldn’t take the chance with the contraband alternative – most people want to live within the laws – however the squeeze on incomes is making the cheaper, albeit illegal alternative, very appealing. Washed diesel and the likes wasn’t such a hot prospect for those involve in the trade during the better economic periods – the public were not so interested in breaking the law to the same extent as they are today. Current pricing for the legal product is at the root of the issue. Reduce the tax wedge and most will revert back to the legal product. @ YoB: I have great respect for your ops, so I just better hang quite. Money (or lack of it) is indeed a problem. Perhaps I am taking a ‘wider’ view of things. For myself I am horrified at the levels of ‘illegality’ – irrespective of whence or how they come. There are solutions (not simple ones) to these problems, but if those in charge (the decision makers) continue with their Medieval, patronizing mindsets: expect the problem(s) to endure. Its truly maddening. As I opined recently: ‘do-gooders’ are the world’s greatest mischief makers! Thanks for your comment – and all your other informative ones. They are much appreciated. Brian. The FT mentioned that illicit fags are even more dangerous than the respectable ones but that must come across as a very nuanced argument down in Moore St. Tend to agree with YoB comments….price is a big factor in the majority of consumers decisions. On another and slightly off topic point….I would be more worried about Crystal Meth which is seeping into Ireland. Last week there was a report of a seizure in Co Carlow. How is it that Singapore, with a similar number in population does not have a drug problem, but Ireland continues to battle with various barons? @sporthog Because Singapore is a (relatively) benign dictatorship 🙂 Lot to be said for it sometimes! @ Sarah, Well if that’s what it takes. More seriously though, I would agree with your comment. I would not fancy such a regime in Ireland either. However I would advocate a much tougher approach to drug trafficking, not to drug addicts, but the drug barons are getting the upper hand. Crime has spread from the major urban centers to the provincial towns, all because the drug barons and continuing to do what they do best… mess things up for everybody. Under the British and shortly after, Singapore was the drug bazaar for the world. Not just opium/heroin which was readily available throughout SE Asia but the full smorgasbord of legal and illegal drugs. The death penalty and stiff jail sentences meted out by the Chinese majority government cleaned it all up in less than 20 years. Ireland does not seem to be able to develop the backbone to deal harshly with wrongdoers. I do not know how a country known for its hardened, tough, violence prone, fighting men could have evolved into a place where police are afraid of the thugs. Sporthog, (and others): Drugs, or more properly addictive substances, may have been used by humans since humanoids first appeared. Humans possess many different sorts of addictive centres – which Nature would have evolved out had they been destructive of our species. It did not happen so us modern humans still possess a range of addictive centres. Its normal to be an ‘addict’! Its abnormal not to be one. Its how each individual exercises their own personal control over their own use that matters. Too much, too often and it is indeed destructive. I can count at least four alcoholics in my family. “Lets ban drink then.” Sure! Enter religion and patronizing do-gooders. “Man is a sinner – he must be saved from himself.” Patronizing sh*te. Predicted outcome? Monopoly criminal enterprises, ‘aided and abetted’ by those do-gooders. Some folk are very dim indeed. Regulate all addictive substances. No big legal or administrative deal here. We already do it for many substances. Remove or dilute the pecuniary reward. The criminality will decrease significantly, as will the abusers. Just accept human nature for what it actually is. We do love our ‘addictive’ substances (fags and alcohol). Its what gives us humans our evolutionary edge! Think of all that lovely prose and poetry that exuded from the Laudanum fogged intellects of philosophers, writers and poets! What did the woman say? “Give up yer oul sins!” Good career move! @ Brian Woods Snr, Granted, we are all sinners to a certain extent. However some drugs such as alcohol etc, can be addictive and destructive… but in moderation they can be very enjoyable etc. However other drugs… are not only addictive but highly addictive and extremely destructive…. Crystal Meth being just one example. That’s the reason why they are banned, due to their destructive power. I heard a phrase once…………. “when one smokes tobacco… you are digging your own grave with a spoon”. A fairly apt analogy… however with certain other drugs.. such as Crystal Meth… “you dig your own grave with a JCB”. There is a profound ignorance in Ireland about Crystal Meth… nobody seems to care that this extremely destructive drug is entering the country in greater numbers. The direct & collateral damage will be high. But in Ireland… where society + political class do not give two hoots about a problem until the it cannot be ignored anymore, whether it be banking, health service etc. Indifference is one of the Trademarks. Here is a snippet from Krugman on rise/fall of dynasties. “How could Microsoft have been so blind? Here’s where Ibn Khaldun comes in. He was a 14th-century Islamic philosopher who basically invented what we would now call the social sciences. And one insight he had, based on the history of his native North Africa, was that there was a rhythm to the rise and fall of dynasties. Desert tribesmen, he argued, always have more courage and social cohesion than settled, civilized folk, so every once in a while they will sweep in and conquer lands whose rulers have become corrupt and complacent. They create a new dynasty — and, over time, become corrupt and complacent themselves, ready to be overrun by a new set of barbarians.” http://www.nytimes.com/2013/08/26/opinion/krugman-the-decline-of-e-empires.html?partner=rssnyt&emc=rss Where will our barbarians come from, rural Ireland or festering slums. @ Sporthog: CM is not a ‘natural’ chemical – its man-made. Therein lies the predicament. However if it was regulated; it was manufactured, distributed and retailed in a form suitable for human consumption – and was available at cost – no criminal would be bothered with it. There would be no incentive for anyone to ‘promote’ it. It would remain a marginal-use substance. Albeit a hazardous one – like ethanol! ” …in Ireland… where society + political class do not give two hoots about a problem until the it cannot be ignored anymore …” Surprisingly many folk do care, and do voice their concerns. Its the listeners that are deaf! Its inconvenient, since they would have to stop their populist, knee-jerking, sit down and slowly and carefully analyze the situation and – something they are hopeless at, imagine as may different scenarios as possible. Usually they ‘see’ only ‘one: the wrong one! But like pissing down your own leg – it sure feels warm to you. Whilst it just looks like pissing down your leg to the rest of us. If society wishes to be rid of the deathly effects of substance abuse and the monopoly criminal enterprises which are spawned by proscription, you have two alternatives: Talibanization or regulation. The former is 100% effective. – sellers and customers are both dead! The latter is not, but it does let folk choose. Choose – and choose wisely! @ MH: Nifty question. Let me dwell upon it! Dublin 4? They are revolting! 😎 Certain sections of Finance Acts have been written to benefit a few individuals. These confer legal status on protection from taxes or increased repayments of tax to the lucky people involved. We know that CJH was bribed by the rich who wished to get richer. Ben Dunne told us. The fish rots from the head. Under my own name I wrote on other matters on these pages, but the comments were removed. This country runs on graft, gross and subtle. Everyone is involved. Pigs are said to be clean animals. Nonetheless, they seem to be able to tolerate a great deal of filth? Selling untaxed tobacco is a matter for the Revenue. Comments are closed.