Illicit trade
Illicit trade
Overview
Smuggled tobacco costs global governments around $40 billion each year in lost revenue. In the UK, it is estimated that about 1 in 7 of all cigarettes and half of all hand-rolling tobacco are not duty paid. The illegal trade in tobacco has strong links to organised crime.
Illicit tobacco has a devastating effect on health. High tobacco prices encourage smokers to give up, dissuade people from starting to smoke, and reduce tobacco consumption overall. But where illicit products are widely available at low cost, these benefits are undermined and smokers are less likely to quit.
Internal documents reveal that tobacco companies have been active participants in the illicit trade in tobacco worldwide. Illicit trade is a law and order issue. Although the tobacco industry argues that high tobacco prices stimulate illicit trade, the international evidence suggests that this is not the case. Some countries with relatively low tobacco prices experience some of the highest levels of illicit activity.
Article 15 of the Framework Convention on Tobacco Control requires nations that have ratified the treaty to introduce pack marking and tracking systems to prevent illicit trade. Countries are also required to introduce firm sanctions against those found to be involved, and to share information with other countries on cross-border trade. International governments are negotiating a protocol on illicit trade. A progres report is due to be presented to the 4th Conference of the Parties in November 2010.
Policies on price and tobacco taxation are addressed under Article 6 of the FCTC. (See ASH Pathfinder: Price and Tax)
ASH Tobacco smuggling webpage
Johnson, P. Cost benefit analysis of the FCTC Protocol on illicit trade in tobacco products. London, ASH, 2009
Fact Sheet 17: Tobacco Smuggling (pdf file)
Fact Sheet 16: The Economics of Tobacco (pdf file)
Current Key Texts
Joossens L, Merriman D, Ross H, Raw M. (2009) How eliminating the global illicit cigarette trade would increase tax revenue and save lives. Paris: International Union Against Tuberculosis and Lung Disease (pdf file)
Arnott D, Joossens L and Bianco E. (2008) Smuggling treaty could reduce tobacco toll. The Lancet 371: 458-460
Joossens L (2007) How big was the global illicit tobacco trade problem in 2006? Geneva: Framework Convention Alliance.
HM Revenue & Customs. (2008) Tackling Tobacco Smuggling Together. An integrated strategy for HM Revenue & Customs and the UK Border Agency.
Department of Health (2004) Tobacco and borders: death made cheaper in On the State of Public Health: Annual Report of the Chief Medical Officer 2004. London: The Stationery Office (pdf file)
HM Treasury (2004) Counterfeit Cigarettes 2004. London: HM Treasury http://www.hm-treasury.gov.uk/media/D62/79/counterfeit_cigarettes_2004.pdf
Joossens L, Raw M (2003) Turning off the tap: the real solution to cigarette smuggling. International Journal of Tuberculosis and Lung Disease 7(3):214-22
other seminal texts
Joossens L, Chaloupka FJ, Merriman D, and Yurekli A (2000) Issues in the smuggling of tobacco products in Chaloupka FJ and Jha P Tobacco control in developing countries Oxford: OUP (pdf file)
Merriman D, Yurekli A, and Chaloupka FJ (2000) How big is the worldwide cigarette smuggling problem? in Chaloupka FJ and Jha P Tobacco control in developing countries Oxford: OUP (pdf file)
Joossens L and Raw M (2000) How can cigarette smuggling be reduced? BMJ 321:947-950
Joossens L, Raw M (1998) Cigarette smuggling in Europe: who really benefits? Tobacco Control 7(1):66-71
Joossens L, Raw M (1995) Smuggling and cross border shopping of tobacco in Europe BMJ 310(6991):1393-7
Useful websites
Economics of Tobacco
World Bank site with resources about the economics of tobacco worldwide, including specific country examples, and a tool to estimate smuggling rates.
European Anti-Fraud Office (OLAF)
Further information
In the March 2008 Budget the Government announced that the new UK Border Agency would develop a strategy to tackle tobacco smuggling (UK Border Agency Business Plan 2009/12 - pdf file).
Japan Tobacco International and Philip Morris International have both signed legally binding memoranda of understanding with the European Commission to stop the illicit trade in their companies’ products. View the text of the PMI agreement and the JTI agreement can be viewed here.
For further information about theses agreements see ASH’s International smuggling webpage.
In 2005, the UK Parliament’s Treasury Select Committee investigated Excise Duty Fraud, and made a number of recommendations relating to tobacco.
