Doubt cast on illicit tobacco trade claims

Research in South Africa has cast doubt on previous claims about the extent and effects of the illicit cigarette trade in South Africa.

In the conclusions to a research paper published yesterday by Tobacco Control, professor Corné van Walbeek of the School of Economics at the University of Cape Town said that, other than in 2010, there was no evidence that the illicit trade was significantly undermining government revenue.

And claims that the illicit trade had consistently increased during the past 15 years, and had continued its sharp increase since 2010, were not supported.

Van Walbeek indicated that the research had been undertaken after tobacco industry claims that the illicit trade in cigarettes had increased sharply since the 1990s and that government had lost substantial tax revenue.

He set out to determine whether cigarette excise tax revenue had been below budget in recent years, compared with previous decades, and to determine trends in the size of the illicit market since 1995.

The research found that cigarette excise revenues were 0.7 percent below budget for 2000–2012 on average, compared with 3 percent below budget for beer and 4.7 percent below budget for spirits.

It found that there was no evidence that the illicit trade in cigarettes in South Africa increased between 2002 and 2009, though it found that there was a substantial increase in 2010, which probably peaked in 2011.

And it found that in 2012 tax-paid consumption of cigarettes increased by 2.6 percent, implying that the illicit market share decreased an estimated 0.6 percentage points.

The research is published as an open access paper at http://tobaccocontrol.bmj.com/content/early/2014/01/15/tobaccocontrol-2013-051178.full.pdf+html.