Then he only pays 10 cents. This is tax evasion. And it is illegal.
Tax avoidance on the other hand is when a person chooses legal means to pay less tax. For example, New York City charges 10 cents per box of cigarettes. However, in Austin, Texas, for example, the cigarette tax is only 1 cent per box. A person avoiding tax would rather buy cigarettes in Austin than in New York City. This is legal. He does not falsify anything. He does not under-declare amounts.
Now it is understandable that people avoids tax. People want to save money. They would look for places where they can buy things less expensively. That is but natural. And they could not be faulted for that. They cannot be blamed if they look for places who charges lower taxes and buy their cigarettes there. And they cannot be blamed if they choose methods to limit the taxes they pay as long as they do it legally.
Now, with the problem of the city losing revenue, I think it can be addressed by formulating better regulatory policies. They could promote effective prevention of smuggling of cigarettes, limit mail-order purchases. They could also be stricter in enforcing licenses and they could punish unlicensed vendors and those that violate the law.
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