Category: Illicit Trade

  • Flavor Ban Will Create Unregulated Markets

    Flavor Ban Will Create Unregulated Markets

    Photo: Tobacco Reporter archive

    The Cigar Association of America (CAA) has published a new analysis showing the significant negative impacts the Food and Drug Administration’s proposed ban on flavored cigars would have on public health and law enforcement activities.

    “Making flavored cigars illegal will not eliminate the demand for flavored cigars; it will only criminalize their sale and create illicit markets,” said CAA President David M. Ozgo in a statement. “The nation has seen this with marijuana and our failed experiment in alcohol prohibition in the 1920s.”

    Earlier this month, the House Agriculture Appropriations Subcommittee approved language in the FDA’s 2024 appropriation that would effectively block the agency from enforcing the proposed ban, Ozgo said. “We applaud the appropriators for recognizing how damaging FDA’s proposed ban on flavored cigars would be.”

    According to the CAA, the existing regulatory system for flavored cigars was designed to ensure that legal tobacco products are manufactured to meet established standards, undergo quality control measures, and prevent inclusion of unregulated ingredients that could pose health hazards to consumers.

    Criminals, however, do not care about regulatory standards or quality control, Ozgo noted. The analysis shows how illicit tobacco products sold through criminal enterprises often contain dangerous contaminants such as asbestos and rat droppings.

    “Further, FDA claims it will only enforce the flavored cigar ban against manufacturers and retailers, not against individuals,” the CAA wrote in a press note. “However, the report notes that nearly all states have cigar excise taxes, and all 50 states have laws that treat unlicensed tobacco sales as a serious crime.”

    In written comments submitted to FDA, many law enforcement groups opposed the ban, including the National Association of Police Organizations, Federal Law Enforcement Officers Association Foundation, National Narcotics Officers Association Coalition, National Troopers Coalition and the National Organization of Black Law Enforcement Executives.

    The groups pointed out they don’t enforce FDA law, but they do enforce state laws requiring that excise taxes be paid on cigars. Shifting resources to police a new crime—sale of untaxed flavored cigars—will mean reduced efforts to combat other criminal activity, according to the law enforcement groups.

    The analysis also raises concerns that law enforcement efforts would fall disproportionately on minority populations. The National Black Chamber of Commerce stated in its FDA comments: “…enforcement of local laws against these transactions (flavored cigars) will certainly bring African Americans, already the subject of over policing, into further confrontations with law enforcement personnel.”

    The Congress of Racial Equality also opposed the ban in its public comments, noting that the deaths of Eric Garner and Michael Brown at the hands of police involved tobacco enforcement. Michael Brown’s initial infraction was related to cigars and Garner’s to the sale of untaxed tobacco.

  • Traders Hit With Tax-Evasion Charges

    Traders Hit With Tax-Evasion Charges

    Image: natatravel

    The Philippines’ Bureau of Internal Revenue (BIR) has filed 69 complaints for tax evasion worth PHP1.8 billion ($32.25 million) against tobacco traders, reports Business World.

    During a nationwide raid in January, authorities confiscated numerous countless cigarette products.

    “This is a warning against all illicit traders,” Internal Revenue Commissioner Romeo D. Lumagui Jr. was quoted as saying. “The BIR will not only raid your stores and warehouses, but we will also file criminal cases against you. This will not be the last.”

    According to Lumagui, the widespread peddling of illegal tobacco products is hampering government efforts to meet its excise tax collection target of PHP352.9 billion this year.

    Lumagui said his agency would partner with online platforms and merchants to impose stricter guidelines on illicit cigarettes.

    Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the state should enforce stricter tax collection measures to reach its collection target this year.

    “Through intensified collections based on current tax laws, the government can further structurally increase its recurring tax revenue collections,” he said in a Viber message.

    The BIR set a collection target of PHP2.6 trillion this year, 11 percent higher than last year.

  • Tax Hike to Boost Tobacco Revenue

    Tax Hike to Boost Tobacco Revenue

    Photo: sezerozger

    The government of Pakistan will collect PKR200 billion ($698.5 million) in tobacco taxes this year, up from PKR148 in the previous fiscal year, reports Dawn, citing a study by The Capital Calling.

    In February, the government significantly increased the federal excise duties. According to The Capital Calling study, the higher prices forced one in every 94 smokers in Pakistan to quit.

    The tobacco industry says the higher taxes have prompted many smokers to buy their cigarettes on the black market. According to industry representatives, volumes of duty-not-paid cigarettes and smuggled cigarettes have shot up 32.5 percent and 67 percent, respectively, since January. This has bumped the illicit sector’s share to more than 42.5 percent of Pakistan’s total tobacco market.

    Critics say the industry is exaggerating the problem, with some surveys estimating the share of illicit sales at only 18 percent of the tobacco market.

    Pakistan Tobacco Co. has scaled back production in the wake of the tax hike, citing difficulties competing with the thriving illicit market. In a letter to the Federal Board of Revenue, the company stated its intention to reexport four cigarette making machines due to a decline in sales volume. The company has reportedly already shut down eight of 10 production lines at its Jhelum facility.

  • Illicit Tobacco Trade Up in Ireland

    Illicit Tobacco Trade Up in Ireland

    Photo: UbjsP

    The illegal cigarette trade cost the Irish government approximately €384 million ($415.25 million) in lost excise duty and value-added tax during 2022, reports the Irish Examiner, citing estimates by the Revenue Commissioners.

    A survey carried out by Ipsos MRBI on behalf of the Revenue Commissioners, shows that 17 percent of all cigarette packs held by smokers in 2022 were illegal. This is up from 13 percent in 2021.

    An illicit rate of 17 percent equates to approximately 31.7 million illegal packs. Nearly nine in 10 of those illegal packs were classified as contraband—that is, normal commercial brands that were purchased abroad and brought into the country. A further 13 percent of cigarette packs were found to be legal but with no Irish duty paid—up 8 percent from 2021.

    The survey also found 17 percent of pouches of roll-your-own tobacco held by smokers surveyed were illegal and 10 percent were legal but with no Irish duty paid.

    In 2022, the Revenue Commissioners seized 51.6 million cigarettes valued at €39.5 million, and 11,803 kg of tobacco with an estimated value of €8.5 million.

    The agency obtained 41 summary convictions relating to the sale of illicit tobacco, four of which were on indictment with fines of €76,250 imposed.

    There were 24 convictions relating to tobacco smuggling in 2022, four of which were on indictment, with fines of €35,100 imposed.

  • Pakistan Tobacco Trims Output as Illicit Trade Booms After Tax Hike

    Pakistan Tobacco Trims Output as Illicit Trade Booms After Tax Hike

    Photo: Taco Tuinstra

    Pakistan Tobacco Co. (PTC) is scaling back production as it struggles to compete with illicit tobacco sales, report Pakistan Today and The Express Tribune.

    In a letter to the Federal Board of Revenue, the company stated its intention to re-export four cigarette making machines due to a decline in sales volume. The company has reportedly already shut down eight of 10 production lines at its Jhelum facility.

    The move comes in the wake of a steep tobacco tax hike. In February, Pakistan increased the federal excise duty by more than 200 percent, driving smokers to cheaper untaxed locally manufactured tobacco products and smuggled cigarettes. In March, production of duty-paid tobacco products plunged 50 percent, according to the Pakistan Bureau of Statistics. The overall large-scale industry, by contrast, suffered only a decline of 25 percent in the production of duty-paid products.

    According to PTC representatives, volumes of duty-not-paid cigarettes and smuggled cigarettes have shot up 32.5 percent and 67 percent, respectively since January.  This has bumped the illicit sector’s share to more than 42.5 percent of Pakistan’s total tobacco market.

    In 2022-2023, the share of legitimate tobacco sector was 41.4 billion sticks while the illicit sector sold 41.6 billion sticks. Observers expect the February tax hike to hand an additional 11.8 billion sticks to the black market in 2023-2024.

    PTC Senior Business Development Manager Qasim Tariq said that, as a result of the tax hike, the government would for the first time in Pakistan’s history lose more tax income to the illicit sector than it earned in revenue from legitimate companies.

    “If the current fiscal regime prevails, damage to the national exchequer as well as the legitimate industry will be immense and tough decisions will have to be taken,” he cautioned.

    A track-and-trace system to help combat illegal tobacco sales has been delayed by legal challenges and other setbacks.

  • Finland and Estonia Investigate Smuggling

    Finland and Estonia Investigate Smuggling

    Image: Oleksii

    Finland and Estonia are investigating a criminal case involving the illegal import of millions of cigarettes into Finland from Estonia and Latvia, reports The Baltic Times.

    By failing to declare imports and pay taxes, Finland missed out on approximately €2 million ($2.18 million) in revenue, according to fiscal authorities.

    Finnish and Estonian law enforcement officers recently seized two freight consignments containing a total of almost half a million cigarettes. The seizures are part of a criminal case estimated to involve the illegal import of about 6 million cigarettes spread over more than 20 different occasions between March and December 2022.

     Some of the cigarettes were found to be counterfeit products.

     During the criminal investigation, five persons have been apprehended in Finland and Estonia.

    Sanctions on Russia and the sharp fall in traffic across Finland’s eastern border have shifted many illegal imports to postal and express freight transport, the Finnish customs authority reports.

  • Ukraine Steps Up Crackdown on Illicit Trade

    Ukraine Steps Up Crackdown on Illicit Trade

    Photo: vanSemenovych

    Since the start of the war with Russia, Ukraine has dismantled at least six illegal cigarette factories, reports EUreporter. These illegal facilities were found to be well-equipped operations that used relatively new cigarette machinery.

    When Ukrainian President Volodymyr Zelensky took office in 2019, he announced an ambitious agenda to combat the illicit tobacco trade, stating that defending a 1,500 km border with the European Union against cigarette smuggling would be a key task as illicit tobacco trade has close connections to criminal activity, organized crime and other areas of black market trade. 

    However, since Ukraine’s war with Russia began in February 2022, illicit tobacco trade increased due to factors including the deteriorating economic situation, disruption of logistical channels, lower purchasing power due to inflation and a tobacco product excise tax increase. Due to the illegal cigarette trade, Ukraine has estimated that it lost over €375 million ($443.3 million) in 2021 and almost €500 million in 2022.

    Other methods to battle illicit trade have included central coordination at the highest administrative level, intensified cooperation with EU member states, the strengthening regional and international collaboration, the vetting of the civil service, stronger control of customs and border inspectors, strengthening of police forces and legislation, and awareness campaigns for consumers.

  • Philippines: Seized Cigarettes Destroyed

    Philippines: Seized Cigarettes Destroyed

    Image: Tobacco Reporter archive

    Seized fake cigarettes, raw materials and cigarette manufacturing machines were destroyed in a fire that affected three warehouses in Porac, Pampanga, Philippines, reports The Philippine Star. The items were worth about PHP4.8 billion ($86.8 million). The fire burned for 15 hours despite efforts from firefighters.  

    The Bureau of Customs and the Bureau of Internal Revenue had seized the destroyed items in raids across the country over the past several years. The warehouses were used as storage for what would later be used as evidence against suspects charged in court.  

    The warehouses are owned by Digama Waste Management Services and Greenleaf 88 Nonhazardous Waste Disposal. 

  • Filipinos Warned Against Disposed Cigs

    Filipinos Warned Against Disposed Cigs

    Image: Andrii Yalanskyi | Adobe Stock

    The Philippines Bureau of Customs (BOC)-Port of Zamboanga has warned the public against buying cigarettes that have disposed of by the agency, reports the Philippine News Agency.

    The confiscated smuggled cigarettes are sprayed with pesticides, according to Mike Lanza, the customs intelligence and investigation service chief of BOC-Zamboanga.

    “Hundreds of people were waiting to salvage packs of cigarettes,” Lanza said, referring to a large-scale destruction of illegal cigarettes completed on April 28, which took place at a sanitary landfill in Barangay Salaan in Zamboanga City. “The drivers of the dump trucks had to stop to avoid accidents.” 

    According to the BOC, individuals will pay scavengers for each pack of cigarettes they can recover. “They sell the cigarettes to community sundry stores at cheaper prices,” said Arthur Sevilla, BOC-Port of Zamboanga acting district collector.

    The confiscated cigarettes are drenched in water and repeatedly crushed by heavy equipment, but scavengers search for packs that may have managed to stay dry.  

  • Philippines Government Ends Illegal Online Sales

    Philippines Government Ends Illegal Online Sales

    Image: Tobacco Reporter archive

    The Philippines government is set to remove 15,000 more noncompliant electronic cigarette sellers in online marketplaces, reports The Philippine Star.

    “We have monitored almost 15,000 sellers online,” said Ruth Castelo, trade undersecretary. “We’ve advised platforms to remove almost 15,000 we observed that were noncompliant. These sellers all have cases already.”

    Unregistered vapor products are subject to the Vape Law, which came into effect Dec. 28, 2022, and prohibits flavors, colorful caricatures on packaging and selling products within 100 meters of schools, among other restrictions.

    “If online platforms would just strictly follow, there is no need to remove the sale of this product from them,” said Castelo. “It’s already indicated which products they can’t sell, but some still evade detection.”