From: Harvard International Review
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While cigarette consumption in Brazil decreased, due to its high taxes, illicit consumption went from 16.6% to 31.1% between 2008 and 2013. Therefore, it seems that Brazil’s taxes do reduce legal consumption but also increase the illicit consumption of Paraguayan brands that allow criminal organizations to foster . This complicated problem does not have a singular solution as it will call for a host of interrelated measures, such as job creation in undeveloped areas in Paraguay, improvements in collecting taxes in Paraguay, and an increase in the prosecution of cigarette smuggling.
Smuggling is desirable because it sometimes pays twice as much as a legal job. In truth, Paraguay’s poverty is intricately tied with its smuggling. President Cartes plans to have a 600 percent increase in investment in construction and also double the investment in education between the years 2015 and 2018. If these plans are relatively successful, there will be job creation in both the present and in the future, as education will permit other industries in Paraguay to develop. But in order for these plans to be executed, President Cartes will have to ensure that taxes are collected.
