What is Excise Taxation

Illicit trade in tobacco products (ITTP) is often facilitated by corruption and in some cases helps terrorism financing. Enforcement against ITTP is vital but involves tradeoffs among competing objectives. This chapter examines (1) the efficient allocation of enforcement resources against ITTP (2) whether to differentially target ITTP that involves violence or funding for terrorism (3) the development of effective enforcement (4) lessons learned from illicit drug markets and (5) theoretical insights about enforcement targeting. It is concluded that targeted enforcement is the most efficient way to deter crime. Some upcoming policy changes in the US may increase the rewards to ITTP, and enforcement resources applied before illicit markets grow further will have a greater impact than enforcement resources applied later. Comparison among the results shows that focused deterrence aimed at ITTP-related violence is most promising and that the goal of reduced funding for terrorism may be more difficult, although combating the former may also help lessen the latter.