Illicit Trade In Tobacco Products Research Articles

Civil society as a catalyst for the ratification and implementation of the Protocol to eliminate illicit trade in tobacco products – an example from Bosnia and Herzegovina

Civil society as a catalyst for the ratification and implementation of the Protocol to eliminate illicit trade in tobacco products – an example from Bosnia and Herzegovina

The health, economic and social burden of smoking in Argentina, and the impact of increasing tobacco taxes in a context of illicit trade.

Tobacco tax increases, the most cost-effective measure in reducing consumption, remain underutilized in low and middle-income countries. This study estimates the health and economic burden of smoking in Argentina and forecasts the benefits of tobacco tax hikes, accounting for the potential effects of illicit trade. Using a probabilistic Markov microsimulation model, this study quantifies smoking-related deaths, health events, and societal costs. The model also estimates the health and economic benefits of different increases in the price of cigarettes through taxes. Annually, smoking causes 45,000 deaths and 221,000 health events in Argentina, costing USD 2782 million in direct medical expenses, USD 1470 million in labor productivity loss costs, and USD 1069 million in informal care costs-totaling 1.2% of the national gross domestic product. Even in a scenario that considers illicit trade of tobacco products, a 50% cigarette price increase through taxes could yield USD 8292 million in total economic benefits accumulated over a decade. Consequently, raising tobacco taxes could significantly reduce the health and economic burdens of smoking in Argentina while increasing fiscal revenue.

Magnitude of illicit cigarette trade in Malaysia: empirical evidence compared with industry studies

BackgroundThe tobacco industry contends that the illicit market in Malaysia occupies 62.3% of the total cigarette market. If this is true, Malaysia has one of the largest shares of illicit...

Measuring Malaysia’s Illicit Tobacco Trade: An Excise Tax Gap Analysis

There is a lack of independent data regarding the illicit tobacco trade in Malaysia. Tobacco Industry (TI) commissioned data has previously been criticised for overestimating the illicit tobacco trade and for a lack of methodological transparency. The aim of this study is to present an independent overview of Malaysia’s illicit tobacco market by measuring the country’s factory-made cigarette excise tax gap. Using data sourced from Malaysian government publications we calculate the excise tax gap between 2011 and 2019 based on existing approaches whereby the excise tax actually paid is compared with that theoretically due based on estimates of total tobacco consumption. For sensitivity analysis, we established 4 different scenarios of tobacco consumption levels. Our central estimate is that the tax gap increased from 49% (2012) to 65% (2017), indicating that about two-thirds of cigarettes consumed were illicit, untaxed cigarettes. Increases in the tax gap occurred when taxes increased (e.g., 2014) and when they did not (e.g., 2017), and a slight decline was also evident when taxes were unchanged (e.g., 2012). The size of the tax gap was sensitive to the consumption estimates, where a 10% increase in consumption was generally associated with 3–5 percentage point increase in the tax gap. This study, to our knowledge, is the first independent estimate of Malaysia’s tax gap/rate of the illicit tobacco trade. We suggest the Malaysian government maintain its tax policies whilst strengthening its anti-illicit tobacco trade measures, including ratifying the Protocol to Eliminate Illicit Trade in Tobacco Products. <strong>Highlights</strong><ul><li>An independent view of the illicit tobacco trade in Malaysia by measuring the country’s tobacco excise tax gap.</li><li>Insights into the accuracy of TI estimates on Malaysia’s tobacco trade.</li><li>Suggestions for actions that should be taken by the Malaysian government to combat the illicit tobacco trade.</li><li>Government Survey data is used to measure consumption which isn’t available each year, so yearly consumption estimates are produced via linear interpolation between survey waves.</li><li>Consumption estimates cover those aged 15 or above.</li></ul>

Illicit trade in tobacco products: recent trends and coming challenges

BackgroundIllicit trade in tobacco products is a menace to the goal of eliminating tobacco consumption. Although tax policy is very effective in reducing consumption, illicit trade can reduce (though not...

Turning a threat into an opportunity: British American Tobacco’s weakening of the Protocol to Eliminate Illicit Trade in Tobacco Products

BackgroundPrevious research has outlined transnational tobacco company (TTC) efforts to undermine implementation of the Protocol to Eliminate Illicit Trade in Tobacco Products (Protocol) and evidence of ongoing TTC complicity in...

Tobacco industry’s elaborate attempts to control a global track and trace system and fundamentally undermine the protocol to eliminate illicit trade of tobacco products

Tobacco industry’s elaborate attempts to control a global track and trace system and fundamentally undermine the protocol to eliminate illicit trade of tobacco products

Напрями удосконалення акцизної політики у сфері тютюнових виробів в Україні

The article analyses the ways to improve tobacco excise taxation in Ukraine considering a respective EU Member States experience, consequences of national reforms held in previous years, as well as challenges and potential threats caused by the pandemic. A worsening economic situation and the recent decline in income compounded the existing problems related to tobacco taxation in Ukraine. The increase of excise tax rate on cigarettes by 20% annually till 2025 and an inconsistent decision on more than four times increase of excise tax rates on electronically heated tobacco products (EHTP) pose a risk of boosting illicit trade. The advance payment of excise tax on imported tobacco products, in turn, negatively affects finances of importers due to the working capital diversion. Following that, the priority steps with regard to the excise policy of Ukraine should be aimed at: 1) revision of the existing plan of increasing tax rates on cigarettes by slowing down the growth of tax burden and simultaneous expansion of the plan till 2028; 2) correcting the burdensome reform on excise taxation of EHTP to establish more liberalized tax regime 3) switching to payment of excise tax on imported tobacco products during customs clearance. The mentioned initiatives taking into account a strong need to improve a fiscal situation in Ukraine due to the spread of COVID-19 will reduce a negative impact of increasing excise tax rates and administration procedures on tobacco industry. They will also prevent the growth of illicit trade in tobacco products and thus will contribute to improving the efficiency of tax system and strengthening the confidence of business entities.

Review of Illicit Tobacco Trade Policy and Program Implementation in the Philippines

Tobacco is the leading risk factor driving death and disability across all ages in the Philippines, based on the Global Burden of Disease Study in 2019, rising from the second-highest in 2009 (Institute for Health Metrics and Evaluation, 2020). In 2019, around 112,000 deaths in the Philippines are attributable to tobacco (Institute for Health Metrics and Evaluation, 2020). Economically, the Philippines was estimated to be spending Php 269.3 billion in 2012 on healthcare and productivity losses attributable to smoking. This is equivalent to 2.5% of the country’s Gross Domestic Product that year (Campaign for Tobacco-Free Kids, 2020). Government efforts in countering illicit trade have been said to be uncoordinated and poorly implemented (Organisation for Economic Co-operation and Development, 2018). Further, reports on actual policy implementation are lacking. In the Philippines, there are few to no reports and studies on the localization and disaggregation of regional data on illicit tobacco trade. This study aims to review the policies and program implementation on illicit tobacco trade in the Philippines in relation to The Protocol to Eliminate Illicit Trade in Tobacco Products or Illicit Tobacco Protocol (ITP). This study is divided into two parts. The first part involves policy and stakeholder analysis; the second part focuses on the program implementation. Based on a rapid scan of online government databases, a total of twelve government policies related to the prevention of tobacco illicit trade were extracted for review from which five were Republic Acts, three were implementing guidelines, two were revenue regulations, a memorandum circular and a presidential decree. Notably, these are only available in each agency’s repository. For the review of programs, a total of eight participants were recruited to participate in the study. The participants represent various agencies and levels of governance: Civil Society, Local Government Unit, and a National Government Agency. The researchers conclude that the Philippines is still ill-prepared in combating illicit tobacco trade. In the context of programs and policies, however, there is huge potential for the government agencies to collaborate and strengthen their core strategies. In comparison to the ITP, many Philippine policies are partially compliant. Many of the mechanisms in place are working for each agency’s objectives, but fail to address the illicit trade at the macro level with its fragmentation. These include not only policy development, but also monitoring. In the event these crucial gaps are ironed out, acceding to the ITP will remarkably benefit illicit tobacco trade control and serve as a catalyst for developing agency policies. This study identified unique characteristics in the policy environment and implementation of illicit tobacco trade. In the Philippines, WHO FCTC Article 15 appears to be (and should be) largely managed by BIR in view of taxation. However, having a better appreciation of illicit trade from the perspectives of health, trade, regulation, law enforcement, and crime reduction, local government can bring to light new approaches and ways to communicate this issue. Moving forward, the researchers recommend to (1) focus on policy gaps, (2) establish an inter-agency framework to strengthen inter-agency coordination, (3) establish a reporting mechanism and monitoring framework, (4) implement best practices and strategies, (5) boost and conduct further research, and finally, (7) accede to the ITP to strengthen Philippine capacity in combating illicit tobacco trade.

The Determinants of Illicit Cigarette Trade in Malaysia

Tobacco use is the leading cause of some preventable deaths and it imposes a heavy burden on countries. Realizing the threat that tobacco use inflicts on global public health, the World Health Organization (WHO) has implemented the Framework Convention on Tobacco Control (FCTC) since 2003. Apart from controlling the consumption of legal tobacco products, the existence of illicit tobacco products in the market is becoming a prevalent problem and a severe challenge to public health. The term “illicit trade” has been well-defined in the WHO FCTC (WHO, 2003) as any practice or conduct prohibited by law and which relates to production, shipment receipt, possession, distribution, sale, or purchase, including any practice or conduct intended to facilitate such activity. To mitigate the illicit trade problem, WHO FCTC established a Protocol to Eliminate Illicit Trade in Tobacco Products (WHO, 2013) based on Article 15 and entered into force on 25 September 2018 (WHO, 2018). This protocol consists of a package of measures in combating illicit trade issues and the forfeiture and confiscation of proceeds acquired from the illicit tobacco trade. Several strategies were implemented by Malaysia to minimize illicit tobacco trade, and Malaysia is considering the idea of ratifying the current protocol (Hassan et al., 2019).

Ten Years of the Tobacco Control Act in New York City

This article describes the impact of the 2009 Family Smoking and Prevention Tobacco Control Act (TCA) on local tobacco control through the lens of New York City’s experience during the first 10 years after the TCA was enacted, highlighting one meaningful change and an opportunity that has failed to materialize. Much of the analysis regarding the TCA highlights the U.S. Food and Drug Administration’s (FDA) new powers and the TCA’s impact on a national level. However, the TCA also opened up opportunities for local governments to pursue sound tobacco control policies that previously seemed fraught with high legal risk. This article focuses on two aspects of the TCA. First, the TCA weakened one of the tobacco industry’s most reliable litigation weapons—preemption. Second, the TCA authorized the FDA to combat the illicit trade of tobacco products. Despite clear language in the TCA, the FDA has not signaled an inclination to take action regarding illicit trade in the context of tobacco tax evasion.

Contributions of the analysis of discarded cigarette packages in household waste in the Brazilian city of Rio de Janeiro, Brazil, to estimate the illegal market.

The illicit trade of tobacco products, by enabling access to cheaper cigarettes, favors smoking initiation and hinders its cessation, minimizing the effects of price policy and taxes on reducing the demand for tobacco. This is especially the case among populations with lower income and schooling, where smoking is concentrated. Its confrontation requires multisectoral actions, aligned with the World Health Organization Framework Convention on Tobacco Control, supported by estimates of the illicit trade magnitude and the analysis of its characteristics. This study analyzes, based on samples of household solid waste collected in 2018 in the city of Rio de Janeiro, Brazil, the conformity of discarded cigarette packages with criteria for their regular commercialization in Brazil, classifying them as legal or illegal. The evaluation was also carried out for the 15 Planning Areas (PA) of the municipality. The Social Progress Index (SPI) was chosen to represent heterogeneities among PA. The average percentage of illegal cigarette packs found was 26.79%, ranging from 3.36% to 46.29% among PA. The PAs with high illegality presented lower Social Progress Index and lower percentages of legal cigarette packages with a price equal to or greater than BRL 7.25. Among the illegal packages, 98.07% were manufactured in Paraguay. The study contributes methodologically to measure the consumption of illegal cigarettes in the second economic capital of Brazil, supporting the National Tobacco Control Policy in the struggle against illicit trade of tobacco products and in the effective implementation of the pricing and tax policy on these products.

SARS-Cov-2, Smoking, and Nicotine Consumption: Investigating the Intended and Unintended Consequences of Responses to COVID-19 around the World

The COVID-19 pandemic brought isolation, social distancing, and economic downturn. The pandemic, and government’s response, also appears to have affected the use of tobacco and nicotine products. Stress and anxiety, both well understood drivers of nicotine use, coupled with a reduction in time spent in areas where smoking is banned, may have driven increased consumption. But the pandemic also disrupted social interactions that may promote smoking; reduction in environmental triggers and disposable income coupled with heightened focus on pulmonary health may have promoted cessation. Additionally, two further features of the pandemic require investigation: Misinformation surrounding the unfounded theory that smoking might have a protective effect COVID-19 (resulting from an incomplete scientific understanding of the viral pathology) could have changed perceptions of risk. Regulatory responses to the crisis also likely affected the availability and accessibility of products. The pressure on governments to respond to the pandemic left little time for regulators to consider possible unintended consequences of unprecedented interventions. Tobacco bans in South Africa and Botswana may have inadvertently increased illicit trade in tobacco products (ITTP). And in other locations, the differential lockdown policies for vape-shops and tobacco retailers may have nudged consumers of safer nicotine products towards combustible tobacco. This paper explores how tobacco and nicotine users altered their consumption in response to the pandemic, and investigates which features of the pandemic, and the world’s response, drove those changes. A review of English-language, peer-reviewed and pre-print research articles published in the PubMed database, is supplemented with a brief analysis of industry data for combustible tobacco and SNPs to explore how the pandemic affected demand for and behaviors around tobacco and nicotine.

Potential impact of eliminating illicit trade in cigarettes: a demand-side perspective

BackgroundThe Protocol to Eliminate Illicit Trade in Tobacco Products (the Protocol) entered into force in September 2018, and commits Parties to implement a package of measures to combat this global...

The use of Internet and social media for illicit trade in tobacco products in Europe: A brief review of scientific literature, law enforcement strategy documents and commercial research reports

The use of Internet and social media for illicit trade in tobacco products in Europe: A brief review of scientific literature, law enforcement strategy documents and commercial research reports

Analysis of submissions to the EU’s public consultation on tobacco traceability and security features

BackgroundThe Protocol to Eliminate Illicit Trade in Tobacco Products requires all parties to establish a tobacco track and trace (T&T) system. In 2016, the European Commission held a public consultation...

Illicit Tobacco in Lithuania: A Cross-Sectional Survey.

Taxation policies are the most cost-effective measure to reduce overall tobacco consumption. However, cigarettes in Lithuania are among the cheapest in the European Union. The threat of the illicit trade is often used to compromise evidence-based policies, pricing policies particularly. The aim of this study was to determine the extent of illicit cigarette consumption in Lithuania and identify the main characteristics of illicit cigarette smokers. The national cross-sectional survey with direct observation of the latest purchased pack of cigarettes was conducted between August and September 2019. In total, 1050 smokers aged ≥18 were interviewed face-to-face. The illicit share of the total consumption of cigarettes per year was 10.7% with 9.7% of smokers showing or describing illicit cigarette packs compared to 17% reported by industry-funded studies. Older smokers, smokers with lower education and heavy smokers were more likely to regularly purchase illicit cigarettes. The average price of an illicit pack was almost two times lower than licit. Although the illicit trade of tobacco products is a serious policy challenge, the threat of an increase in illicit trade should not delay tobacco taxation improvements.

Prices and Illicit Trade of Cigarettes in the European Union: A Cross-sectional Analysis.

Within the context of the World Health Organization Framework Convention on Tobacco Control Protocol to Eliminate Illicit Trade in Tobacco Products and the impending revision of the European Union (EU) directive on tobacco excise rules we assessed whether cigarettes price is linked to being offered illicit cigarettes. We combined data being offered illicit cigarettes from the 2015 Special Eurobarometer Survey on Illicit Tobacco (N = 27,672) with area-level data on Gross Domestic Product, unemployment, perceived corruption, and sharing a border with a non-European Economic Area (non-EEA) state. We used the 2015 Weighted Average Price of cigarettes (WAP), which reflects the average price of a cigarette pack in each Member State. We assessed associations between prices and illicit trade using three-level ordered regression models. About 19.6% of respondents reported ever being offered illicit cigarettes, 6.4% repeatedly. In fully adjusted models WAP was not associated with being more likely to have been offered illicit market cigarettes more often (adjusted odds ratio = 1.02, 95% confidence interval: 0.91; 1.15). Sharing a border with a non-EEA Member State was associated with increased likelihood of reporting being offered illicit cigarettes more often (1.73, 1.26; 2.39). This study found no significant association between cigarette prices and reporting being offered illicit cigarettes; sharing a border with a non-EEA Member State was linked to illicit trade. This study adds to evidence that increasing prices of cigarettes are not associated with illicit trade and that the focus should remain on securing supply chains, including through features such as independent traceability systems. After adjusting for individual and regional factors, we did not identify an association between prices of cigarettes and likelihood of reporting being offered illicit cigarettes in the EU. Sharing a border with a non-EEA state, however, was associated with increased likelihood of reporting being offered illicit cigarettes more often. This study adds to evidence that increasing taxes and prices of cigarettes are not a driver of illicit trade and that policies should maintain their focus on securing the supply chain.

The Impact of E-Cigarette Regulation on the Illicit Trade in Tobacco Products in the European Union

This appendices to this report can be found at: (https://ssrn.com/abstract=3435260). In regulating tobacco products, governments seek to promote public health by discouraging consumption. However, imposing regulatory costs and taxes on licit producers and consumers presents an economic opportunity to criminal actors to profit from skirting these laws. Illicit trade in tobacco products (ITTP) thus frustrates the goals of tobacco regulation. We estimate that a 10% increase in the price of licit cigarettes (which might result, for example, from a tax increase) leads to a 3.6 percentage-point increase in the illicit share of the market, which averages about 11% in the EU. However, e-cigarettes and their apparent health advantages over traditional tobacco products present regulators with an opportunity to increase taxes without swelling the flow of illicit goods: By allowing consumers a third choice as an alternative to either paying higher prices or buying illicit products, e-cigarettes could serve as a “safety-valve” allowing for higher taxes (and stricter regulations) on traditional tobacco products without encouraging the illicit market. This study tests and find support for that hypothesis and seeks to investigate the effects of law and policy on the extent of that substitution. We begin by analyzing the current policies of European Union Member States toward tobacco products and e-cigarettes and reviewing the literature on the factors that drive consumers to use illicit tobacco products and the evidence that e-cigarettes substitute for conventional cigarettes. We then assemble a dataset of volumes and prices for legally sold conventional cigarettes and e-cigarettes, and for illicit or smuggled products. An econometric analysis of those data generates a model relating the size of the ITTP market to e-cigarette policies and market penetration. The results show that higher taxes and prices for licit cigarettes are positively associated with higher ITTP shares and illicit-cigarette quantity. When the e-cigarette market is small, increases in cigarette prices have a positive and statistically significant effect on ITTP. The elasticity remains positive throughout the range of the data, although it decreases with the size of the e-cigarette market. However, the availability of e-cigarettes moderates the effect of conventional-cigarette prices on ITTP volumes: the more available e-cigarettes become, the less ITTP market share rises in response to tax-driven price increases for conventional cigarettes. In the presence of sufficiently robust e-cigarette markets, cigarette prices have no measured effect on ITTP volumes. Thus, as e-cigarettes become more available, the positive association between cigarette prices and taxes is attenuated. This suggests that e-cigarettes are substitutes for illicit cigarettes. Conversely, demand for e-cigarettes responds positively to cigarette prices while demand for conventional cigarettes responds positively to e-cigarette prices, thus indicating that the two goods are substitutes. However, while higher cigarette prices are strongly associated with larger e-cigarette markets, the same cannot be found for cigarette regulation here. Other important findings include that: • E-cigarette revenue responds positively to cigarette prices, negatively to product bans, and negatively to stricter regulation (although the evidence is mixed regarding the last point). • More stringent tobacco regulation, particularly health warnings on packaging, is associated with lower demand for cigarettes. • Demand for e-cigarettes responds negatively to its own price and to the stringency of regulation aimed at vaping. • No e-cigarette regulation at all is most conducive to e-cigarette sales; all the other regulatory coefficients are negative. • Strict limits on public use and pharma-only regimes are about equally detrimental to e-cigarette sales, and the apparent impacts are large. • The Tobacco Products Directive has been more favorable for e-cigarette sales than either of those regimes, but not as good as no regulation. Policy discussions and recommendations are presented. Optimal taxation would establish excise duties for combustible nicotine products at a rate that deters initiation and incentivizes switching to lower-risk products, while avoiding diversion to the black market. Non-combustible products should then be taxed at a low, zero, or even a negative level. Furthermore, the optimal tax on conventional cigarettes will be higher in the presence of low-priced reduced-risk substitutes than in their absence.

Appendices to The Impact of E-Cigarette Regulation on the Illicit Trade in Tobacco Products in the European Union

This paper contains the appendices to the report Impact of E-Cigarette Regulation on the Illicit Trade in Tobacco Products in the European Union (https://ssrn.com/abstract=3435177). The contents will be of interest to researchers studying EU regulations regarding tobacco and e-cigarette sales and usage. Appendix 1 includes tables and data covering regulation of tobacco and a detailed description of tobacco policies as of 2018 across the EU. These data include the regulatory group based on the Tobacco Control Scale by country and year, policies concerning age restrictions and use of tobacco by adults, cigarette prices and taxation, smoking bans, advertising restrictions, tobacco control expenditure, WHO FCTC status, and support for smoking cessation. Appendix 2 contains information and data on e-cigarette regulation in the EU. Regulatory groupings and detailed data are included. Data include information on product bans, advertising bans, age restrictions, size limits on e-liquid cartridges, nicotine limits in e-liquids, banned substances in e-cigarettes, flavor bans, distance sales bans, and public use bans, by country and year. The empirical work in the report demonstrated that there is a positive association between e-cigarette sales revenue and the price of cigarettes in the EU. Appendix 3 shows the implications of that association for whether the two goods are substitutes. Under plausible economic assumptions for the markets considered here, it is shown that the former implies the latter. It is not necessarily the case that a positive association between e-cigarette revenue and the price of cigarettes implies that the two goods are substitutes. However, in two important cases, that implication does follow, and plausible cases can be made for both of those cases for the market under consideration. Those cases are when there is no connection between cigarette prices and the supply curve for e-cigarettes, and when the supply curve is perfectly elastic.