An increasing black market of cigarettes smuggled into the country by criminal gangs is the likely byproduct of rising tobacco prices, says Customs.
Speaking before an expected 3 per cent tobacco price increase on December 1, Customs' acting national manager of investigations, Noel Dravitski, said smuggling would outstrip illegal tobacco manufacture.
The price increase will arise from the Government's automatic lift in excise, in line with the consumer price index.
The Treasury has not yet released figures and tobacco companies will not announce price increases until next week, but a packet of 20 cigarettes is expected to rise by about 30c and loose tobacco by at least $1 a packet.
"I think it is only a matter of time before we end up in the situation where criminal groups will organise themselves to smuggle cigarettes," Mr Dravitski said, pointing out its advantages over drug smuggling.
"You don't spend a million years in jail if you smuggle cigarettes ... and there's a reasonable profit."
Illegally manufactured tobacco had been found in small amounts nationwide.
Although it is not illegal to grow tobacco for personal use, it is unlawful to grow it for "sale, gift or exchange."
To date, two manufacturers had been prosecuted by Customs and three people for supplying illegal tobacco, Mr Dravitski said, but it was all thought to come from the same source in the Motueka area.
Much of New Zealand's tobacco was once grown there, but when manufacturers sought cheaper overseas sources, growers continued in the hope of finding new markets. This had left considerable stockpiles of tobacco in the area.
But Mr Dravitski believed illegal manufacture was "minor" in comparison with the probability of smuggling.
One person, he said, had been found this year with 34 cartons of cigarettes in a suitcase.
Two seamen had also been prosecuted, in Christchurch and Wellington, for attempting to smuggle cigarettes.
The man in Wellington was found with 108 cartons, which have a retail value of about $8500.
John Galligan, Auckland-based head of corporate and regulatory affairs for British American Tobacco, said Australia's experience showed the increasing excise encouraged the size of illegal tobacco activities.
He estimated the illegal industry in Australian to be worth up to $700 million a year.
In a recent bust in Australia, $3 million worth of illegal tobacco was seized.
The $100,000 robbery in Wainuiomata last week of a van carrying cigarettes was "not an uncommon event these days," he said.
"Our argument is, don't treat excise like a cash cow because you get to the point where there is a trade-off. And the trade-off might be a decline in excise overall, because an increase pushes the criminal element to the next stage," Mr Galligan said.
The industry did not expect a drop in excise, "but we do want Government to look at excise ... to make sure that they are not compromising other aspects of tobacco control initiatives purely through tax collection."
- NZPA
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