Looting tobacco companies
By Pierre Lemieux
The settlement between two major cigarette manufacturers (Imperial Tobacco Canada and Rothmans, Benson & Hedges) and the federal and provincial governments is a shame. It not only continues the persecution of smokers and their suppliers, it also brings state surveillance and the egoism of state rulers to new heights.
In the early 1990s, after several years of increases in tobacco taxes, cigarette smuggling had increased to the point where perhaps half the cigarettes smoked in Québec were illegal and government revenues from tobacco taxes were in free fall. In February 1994, in order to kill the black market, the federal and provincial governments had to cut tobacco taxes dramatically — by 80% in Québec.
Most of the smuggled cigarettes were the products of major Canadian manufacturers which had been exported to the U.S., thereby avoiding tobacco taxes (the law has since been changed to preclude this), and re-imported illegally into the country. Imperial and Rothmans, Benson & Hedges have been prosecuted for knowingly participating in this scheme. The “agreements” reached at gun point settle these prosecutions. A few tobacco executives from another manufacturer, JTI Macdonald, who were individually prosecuted and are awaiting their criminal trials, are not affected by the settlement.
My friend Bob Bexon — who died in an accident last month — was Vice-President of Marketing for Imperial in the early 1990s. (I did not know him at the time.) In November 2004, after he had retired as Imperial’s president, the company was raided by the RCMP, the praetorians par excellence, in search of evidence for government prosecutors. Bob was very disturbed by the cops showing up “in flak jackets with side arms”. During the four following years, he was himself under the threat of criminal prosecution.
The prosecuted companies were apparently guilty of knowing that their exports would be re-imported into Canada in order to serve their customers who would otherwise have resorted to other smuggled products. This is not surprising: after all, cigarette manufacturers are, like other private suppliers, motivated by self-interest.
It is because private firms are motivated by self-interest that consumers can get what they want. To paraphrase Adam Smith, “[i]t is not from the benevolence of the brewer or the cigarette manufacturer, that we expect our beer and smoke, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.”
Cigarette taxes have now crept back to even higher levels than in the early 1990s. Not surprisingly, smuggling has returned, perhaps at comparable levels, although from different sources. Black markets always develop when the state tries to ban or severely restrict something consumers want, as the long history of tobacco, alcohol, prostitution, banned books, etc. amply demonstrates. Black markets are a way for consumers to reassert their sovereignty, whatever you, I or others think of this or that product traded on them. Long live the black market!
Now, you see, we don’t have, on one side, bad egoists who are just thinking of making a buck with wicked consumers, and, on the other side, statocratic angels sacrificing themselves for the love of their subjects. Men don’t transmogrify from egoists to altruists when they leave the market to become politicians or bureaucrats. They remain the same.
The statocrats are thus very happy to have confiscated, through the settlement, an additional $1.1 billion from legal tobacco manufacturers. The 11 governments have signed an 18-page agreement describing precisely how they will share the loot.
The looters are also very happy with the new surveillance and control powers they have gained over the two tobacco manufacturers. The Canada Revenue Agency will monitor new internal compliance programs that the companies are forced to establish under the settlement. The detailed requirements include a “Know Your Customer” program and anti-money laundering procedures. Like so many of their compatriots, these companies will be obliged to play cop for the government. A great step forward for the Surveillance State!
In this agreement, as in so many other cases, the Conservative government dutifully finished what the Liberals had started.
Another crucial consequence of the settlement is too easily overlooked. The $1.1 billion that the tobacco companies will be obliged to cough up will, like the rest of the taxpayers’ money, be used mainly to favour some politically privileged clientèles and to further crush our liberties.
(August 2, 2008)
