One in three cigarettes in Macau is illegal, study finds

More than one-third of all cigarettes consumed is either illegally produced in Macau or smuggled into the city, giving Macau has the second-­highest incident rate of illegal cigarette consumption in Asia, according to a regional study.

A report titled “Asia-16: Illicit Tobacco Indicator 2014” was commissioned to better understand the use of cigarettes in Macau and how many of these are being sourced illegally, according to a story in the Macau Daily Times. In 2014 approximately 34.5 percent of all cigarettes consumed within the territory were illegal, and more than two-thirds of cigarettes coming into the city from overseas were illegal, the study found.

“It hurts the government financially, effectively wiping out the tax revenues that could have covered this year’s cash payout to more than 20,000 citizens,” Adrian Cooper, CEO of Oxford Economics, reported on the economic effects of the illegal cigarette trade at a press conference. According to Cooper, the estimated revenue loss to the government is MOP185 million.

“Another way to look at this is that it’s equal to 0.7 percent of the total non-gaming revenues,” said Cooper.

The most popular cigarette brand is sold at MOP30 locally, compared with only MOP9 for the most popular brand in China, making cigarettes more than three times as expensive in Macau as they are in the mainland of China.

“The difference in price creates an incentive for cross-border trade in cigarettes,” said Cooper, “which is facilitated by [significant] cross-border traffic in Macau.” Cooper stated that there is also a “lack of rigorous custom enforcement at the border.”

According the report, 0.4 billion of the 1.1 billion cigarettes consumed in the city last year were illegal. Approximately 141 million cigarettes originated in mainland China, and 117 million were from Hong Kong; however, only 10 million were counterfeits produced within Macau.

To combat the issue of illicit cigarettes, Cooper stated that a three-pronged approach would be required, according to the Times.

“The government should consider introducing a balanced excise policy with regular but moderate tax increases to keep excise tax at pace with inflation,” he said. “It is also essential to step up law enforcement efforts and, at the same time, raise public awareness on the serious consequences of selling and buying illegal cigarettes.”