Thursday, October 20, 2011

40% of All Cigarettes Sold in New Jersey are Smuggled Illegally

According to statistics 40% of all tobacco products smoked in New Jersey is brought illegally into the state, this is the highest percentage of any state in the nation, leading to a loss of more than $500 million in uncollected tax revenue annually.
The reason is evident: New Jersey set a $2.70 tax on each package of cigarettes sold, which is one of the highest rates in the nation.
Criminal gangs and various people operating with terrorist groups obtain a quick profit by smuggling a great number of cigarettes from other states and selling them in New Jersey. So, each day, smokers in New Jersey try to evade the high tax by ordering smoking products on the internet stores or go to the neighboring states, usually Delaware, where the price is very low.
“New Jersey faces a consequential problem from tobacco tax avoidance and smuggling. A growth in the rate of tax assessment will lead to fewer legal and even completely illicit sales of tobacco products,” said the author of report, Eric Friedman.
The given report which is the first official data on the financial toll tobacco smuggling takes on the state also raises questions about whether New Jersey is doing enough to fight this problem.
The calculated $519 million in uncollected tax revenue, approximately 1.5% of the 2012 budget, is similar to the amount increased by the controversial millionaire’s tax in 2009.
The great amount of cigarettes, smuggled into the state, nearly 75%, is brought by those who want to get into big money, the report said. Very often, retailers of illicit tobacco products use lower-priced, counterfeit tax stamps in order to evade detection.
Charles Giblin, a police officer at the Office of Criminal Investigation, declared that smuggling arrests have increased from 40 in 2009 to 187 last year.
Currently police officers arrested a 63- year-old man, who was buying cigarettes in Virginia for approximately $35 per carton and sold them at his shop for already $58. On the average, a carton of cigarettes is sold for $80 in New Jersey.
According to County Prosecutor’s Office, this man was selling about 500 cartons per week, which cost the state about $13,500 in lost tax revenue. When police screened his car, there were found more than $80,000 in cash.
“We are going to use whatever means and powers we have in order to eradicate smuggling once and for all. We also plan to introduce modern tax stamps, which will conceal codes that include information of each package of cigarettes. At present, retailers and enforcement officials use hand-held scanners, which show if a stamp is authentic, and also where the pack came from and where it has been,” Giblin said.