Rise in Cross-Border Tobacco Smuggling: Impact on Massachusetts

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Rise in Cross-Border Tobacco Smuggling: Impact on Massachusetts
Maine's stricter tobacco regulations have led to an increase in cross-border smuggling and a decrease in tax revenue.

According to the Maine Policy Research Institute on September 4th, since June 2020, following the implementation of stricter regulations on tobacco products in Massachusetts (referred to as "The Bay State"), including the ban on sales of all flavored tobacco products (including e-cigarettes and menthol cigarettes) and a 75% increase in tobacco consumption taxes, there has been an increase in cross-border smuggling, a decrease in tax revenues, and a heavier workload for state inspectors.


After a year of implementing the ban in Massachusetts in June 2020, tobacco consumption in the region has not decreased. Instead, sales have shifted to neighboring New Hampshire, where taxes on tobacco are lower. Consequently, the only apparent outcome is a significant decrease in income for Massachusetts store owners and employees, as well as the loss of $11.4 million in tax revenue.


The ITTF (Illegal Tobacco Task Force) mentioned in last year's report that the high tax rates on tobacco products in Massachusetts provide motivation for smugglers to import such products from low-tax states and illegally sell them within the state. The Bureau of Alcohol, Tobacco, Firearms, and Explosives also noted that "tobacco smugglers will purchase tobacco from low-tax states and then sell it in high-tax states.


When it comes to this, it raises concerns about how authorities may have missed the significant increase in tobacco smuggling last year. Menthol cigarettes and cigars constitute the largest category among illegal tobacco products. According to the Massachusetts police report, the confiscation of smuggled cigarettes in 2021 surged from 40 packs to over 1,900 packs compared to the previous year. Additionally, the seizure of illegal smokeless tobacco in 2022 witnessed an 800% increase compared to 2021.


In fact, the state's revenue agency has stepped up its enforcement efforts against tobacco tax evasion. From the fiscal year 2020 to the fiscal year 2022, inspection activities have increased by more than 42%. This has led to a significant surge in confiscation actions, while the practice of cross-border smuggling still persists.


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