Bootleg cigarette plant in the polder

A couple of weeks ago I noticed a news item about a bootleg cigarette plant in the polder. First I was a bit surprised, because who would make all that effort of setting up an illegal factory in one of the most regulated countries in the world. And then trying to sell a product which is a bit bulky for a small price.

The magic word of course is “tax”. To give you an idea of the break down of the price of a package of cigarettes (19 pieces) of 6 EURO:

€ 3,31 excise
€ 1,04 value added tax
€ 1,65 margin for producer and retailer (production costs etc.)
€ 6,00 total

That makes 4.35 EURO tax on a package of 6 EURO. You can imagine that one could make a nice profit selling cigarettes illegally. Even better, why not setting up a bootleg cigarette plant in the polder close to your customers. Still, it must be a pain to distribute a product which is mostly air to thousends of people right under the nose of the cops.

Now, I’m not a smoker and never have been. Disgusting habit actually. But that’s not the point. The case that the Dutch governmant is a champion in taxing its subjects, is! Last two years it was one tax increase after the other. If not in plain sight then in disguise, for instance a hefty increase in rents forced upon the building societies.

The question is, will all these increases help the government meet its budget goals. Already business near the border with Germany and Belgium are going bankrupt, because citizens shop abroad. Not only will this translate to less tax revenues, but also we have to pay for extra unemployment benefits.

The situation close to the border is depressing, the population at large isn’t happy either. Consumers keep being very tight with their money and the economy is noticing. Recovery of the economy in Holland is one of the slowest. Could it be that making sure that every household would feel the pain by means of widespread tax increases is actually a very dumb idea? Even punishing those households who have their finances in order and should be the first to help the recovery?

March 19th we have elections for the municipalities. It is predicted that the present coalition is going to suffer severly. A case of one excise too far.