The Future of Pipe Smoking

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jorgesoler

Can't Leave
Dec 3, 2014
401
73
I don't want to live in a world where tobacco and alcohol does not exist. With government pushing higher and higher taxes on tobacco and alcohol products, we are seeing a trend in the UK and other markets where users are resorting either to black markets or to legal substitutes such as Vapers or electronic cigarretes. According to ASH.org the high level of tax on tobacco in Britain has two purposes: to reduce smoking through the price incentive, and to raise taxes from a source that has least impact on the economy Tobacco Tax Revenue. My concern here is that if we come to a point where politicians start raising tax beyond Laffer's danger zone1, more and more people will be driven to tobacco substitutes or substandard tobacco products that will be available in black markets. This could have an impact in our way of life and create the conditions where pipe tobacco companies could go busted. Let us not forget the pipe tobacco industry is a dying one due to the popularity cigarettes have in our society, so the more pressure politicians put into this industry, the more likely they are to decrease sales, which in turn, will have an impact on all incentives tobacco companies have to produce and sell tobacco products due to decreasing margin profits. If we see the laws of demand together with tax pressure on consumption, it will be easy to see how this is putting pressure on all tobacco companies to assume part of the tax burden in order to stay open for business. My question is this. How do you all see the future of pipe tobacco in the short/long term if taxes keep rising on tobacco products?
mapa_fiscalidad_zps59c06ed5.jpg

1.Laffer Curve

 

sw0snuff3r

Starting to Get Obsessed
Oct 3, 2014
239
0
If I'm not mistaken, nasal snuff is exempt from the tobacco taxes in the UK so if the taxes get too high there some may move to, or supplement, their tobacco use with it. I don't think there is enough demand for a pipe tobacco black market like there is for cigarettes so it could be tough getting around the taxes.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
If I'm not mistaken, nasal snuff is exempt from the tobacco taxes in the UK so if the taxes get too high there some may move to, or supplement, their tobacco use with it. I don't think there is enough demand for a pipe tobacco black market like there is for cigarettes so it could be tough getting around the taxes.
Many people, including myself, are already buying tobacco products in Spain to avoid paying for higher taxes in the UK, so the incentives for the black market are in there. And most of the Birmingham Pipe Club members do the same. As for snuff, your are quite right. This tobacco product is exempt from any duty or import tax. The reason for this is quite obvious. Snuff is the least popular of all tobacco products, so increasing taxes in this niche market will put these tobacco companies out of business.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
If the black market comes and somebody sells some counterfeit pipe tobacco, he better have a black market way of getting out of town. Bodies with pipe cleaners shoved under the finger nails would become a common occurrence.
Well, this is already happening with the cigarette market in the UK Counterfeit Tobacco

 

warren

Lifer
Sep 13, 2013
10,110
9,880
To answer your question: I see pipe smoking, in the short and long term, as constantly morphing. Today we utilize, mostly "boutiques" for our purchases of blends and pipes. In not too many years it will be "only" boutique dealers available. And, if you smoke at the rate I do, you'll need real money to continue smoking. It's akin water in southern California, if you can afford it, you'll have it
I suspect the number of tobacco growers, processors, and wholesalers will shrink. Again some people will manage a living, just not as many. And they will be operating at a scale far smaller than today.
Many years from now, when the Third World starts to reduce cigarette smoking, the big manufacturers will sell off or dismantle their tobacco related subsidiaries and stick with food and other profit generators. Peterson and others will go the way of Dunhill, adapting or ceasing to exist. Small pipe manufacturers will shrink operations and pipe cost will most likely rise. There will be no need for factory producers and independent carvers will have a smaller customer base, logically there will be far fewer carvers. Like the "horse and buggy", there will still be a few hobbyists, nicotine will probably be dispensed in pills, cigars will be again relegated to upscale clubs and so on.
I see in my crystal ball, the smoking of tobacco becoming a hobby of the wealthy. This change will take years, I won't see it, but once Asia and Africa cease to be fertile ground for tobacco products, the demise of pipes and other tobacco related objects is a foregone conclusion. Except for a few aficionados here and there pipes will most likely become objects of collectors of historical paraphernalia.
Without the profits, the providers will wither away and, for the most part, disappear.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
The scarcity may keep the prices inflated just enough to be affordable. Consider the cost of sports and concert tickets. There could be vertical integration from grower to seller who accepts a lower profit margin.
If there is not enough demand, prices will go down no matter what. This is the case with snuff, for instance. Snuff is the cheapest tobacco product you will be able to find in the UK.

 

Perique

Lifer
Sep 20, 2011
4,098
3,879
www.tobaccoreviews.com
I think any overbearing government taxation regime that encourages the growth of a tobacco "black" (ie: "free") market is a good thing. So bring it on. The Law of Diminished Returns, as always, applies. And Western governments are guilty of massive overreach, the trajectory of which cannot be sustained (or afforded).

 

warren

Lifer
Sep 13, 2013
10,110
9,880
There are not enough pipe smokers to support a "black market" even today. We're not talking marijuana or coke here, we're talking nasty, old tobacco. Taxes are only part of the problem. As soon as the market for tobacco in the less developed countries starts to dry up the profit incentive is gone. Tobacco farmers will find other crops or build condos on the property.
As I said, smoking tobacco will become something for the rich to enjoy in clubs or their homes. Also, there are other products on the market or coming soon, tobacco will lose what little allure it still retains. Our grandchildren will look on the pipe as our children today look on the rotary phone, as a part of history to be wondered at. I suspect that if any of us living now could come back in a hundred years or so, we would feel very, very out of place.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
But this is like I told you guys before. I for one do buy my tobacco in Spain to avoid paying for any tax. And as far as I know, the rest of the Birmingham Pipe Club members do the same. The black market is here to stay, and if politicians wants to raise more tax on tobacco, they need to lower taxes as the Laffer curve demands.

 

warren

Lifer
Sep 13, 2013
10,110
9,880
Spain will soon catch on and realize that they are losing substantial moneys. Enjoy the situation while you can Jorge.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
This link, for instance, belongs to a US tobacco provider that buys in the US and Spain and sells in the UK.
https://cheap.tobaccoonline.co.uk/tobacco_splash.php

 

warren

Lifer
Sep 13, 2013
10,110
9,880
Spain will soon catch on and realize that they are losing substantial moneys. Enjoy the situation while you can Jorge.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
Spain will soon catch on and realize that they are losing substantial moneys. Enjoy the situation while you can Jorge.
I am trying to explain this to you mate. The more you raise tax on something, the less income you get. See the link I provided to the Laffer model.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
The reason why the UK tax and revenues office is loosing money is because of people like me who are happy to bend the rules and buy tobacco somewhere else where the tax burden is not so high (Laffer curve).

 

planetary

Starting to Get Obsessed
Jul 4, 2012
165
4
SF Bay Area
Jorge, I would agree if the only goal of the tax was to gain revenue. But as you mentioned, there's a social engineering purpose: to reduce the use of tobacco. So the tax rate could easily be increased over time as revenues decrease.

 

jorgesoler

Can't Leave
Dec 3, 2014
401
73
Jorge, I would agree if the only goal of the tax was to gain revenue. But as you mentioned, there's a social engineering purpose: to reduce the use of tobacco. So the tax rate could easily be increased over time as revenues decrease.
The fact you raise tax does not necessarily imply you will collect more revenues. Tax, like every other market, is open to competition. And the cheaper the tax burden, the more consumers/bidders you will get. This is why some US or UK manufacturers are exploiting China or Bangladesh: they offer cheaper labour.

 

warren

Lifer
Sep 13, 2013
10,110
9,880
I understand the Curve. But, when the market dries up there is no need for the product. And make no mistake, the market for tobacco products is rapidly shrinking, thus the profit is gone and the "Laffer Curve" no longer applies as there is nothing left to measure. No profit, no product!
Tobacco usage in the general population is a recent phenomenon in the time-line of man. It's nearly run its course and will be replaced by another, hipper vice. As you requested, my opinion is that it will go the way of the "horse and buggy." Most likely in only a couple more generations. I have no interest in debating my opinion, which you solicited. Can't be changed! It's etched in stone and it's mine alone.

 
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