US: Task Force Will Fight Cigarette Smuggling

Source from:  The Legislative Gazette (NY)  04/08/2014

Gov. Andrew Cuomo announced early last week the creation of a task force to combat illegal cigarette sales he says rob the state of tax revenue.

The governor has tapped the head of the Tax Department's Criminal Investigations Division, Michael Spinosa, to lead the effort.

The Cigarette Strike Force is comprised of 13 state, local and federal agencies and will focus on preventing counterfeit or untaxed tobacco products from making their way into New York and identifying and tracing revenue from their sale. Agencies including the New York State Department of Taxation and Finance; U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives; District Attorney's Offices and police will combine resources to expand their databases and share information in order to tackle major trafficking organizations. Revenue seized by the task force will be shared among participating agencies and the penalty for possession of unstamped cigarettes is $600 a carton — which contains 10 packs.

"This new law enforcement strategy will help to crack down on these illegal cigarette sales and capture those smugglers who seek to evade the law and rob the state of the revenue it is rightly owed, thereby putting  an additional burden on law-abiding taxpayers," Cuomo said. "Would-be traffickers are now on notice; they will be caught and they will be brought to justice."

Spinosa — a former New York City Detective Sergeant, who supervised long-term narcotics investigations — will serve as chief investigator and supervise the governor's task force. The Tax Department's Criminal Investigations Division will spearhead the initiative and coordinate with participating agencies. According to the Governor's Office, under Spinosa's leadership the division has already seized illegal cigarettes in 18 cases this year.

The task force was presented the same day the Attorney General's Office announced a $70 million lawsuit against Federal Express Corporation, saying the company has shipped more than $33 million worth of illegal, untaxed cigarettes to New York. The lawsuit joined and expanded upon a similar suit started by New York City and alleges the company made nearly 33,000 illegal shipments that violated a 2006 agreement with the state.

"Not only has FedEx cheated the state out of millions in tax dollars — but many of these cigarettes may have ended up in the hands of teenagers, who are particularly vulnerable to low-priced cigarettes," Attorney General Eric Schneiderman said.

New York has the highest cigarette tax in the nation at $4.35 a pack— not including New York City where it's taxed an additional $1.50. According to a study conducted by the Tax Foundation, a conservative Washington D.C.-based think tank, nearly 60 percent of cigarettes purchased in New York are smuggled in and the state has the highest rate of inbound smuggling in the nation.

The study classified smuggling as cigarettes with counterfeit state tax stamps, counterfeit versions of legitimate brands, hijacked trucks, or officials turning a blind eye. It also indicates smuggling rates have increased as tax on the product has risen over the last few years. Enditem