Category: Illicit Trade

  • Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Image: japhoto

    Trinidad and Tobago loses about $30 million annually in uncollected taxes from illicit cigarettes, according to participants in a forum on anti-illicit trade hosted by the T&T Manufacturers’ Association, reports The Trinidad Guardian.

    Policymakers, law enforcement agencies, regulatory bodies and major brands, such as Puma, Moet Hennessy, Servier and BAT, participated in the forum.

    “The illicit cigarette trade makes up 5 [percent] to 10 percent of the market, and British American Tobacco fears this share can grow as consumers tend to favor these brands because they sell at a lower price,” said Arturo Payro of BAT. “Cigarettes are T&T’s most illegally traded products in quantity and value.”

    Randall Karim, permanent secretary (ag) of the Ministry of Trade and Industry, stated that a strong legal framework will act as a powerful deterrent and send a strong message to smugglers that illegal trade is intolerable.

  • Altria Urges Action Against Illegal Vapes

    Altria Urges Action Against Illegal Vapes

    Photo: Malcolm Griffiths

    A booming illegal disposable flavored vape market is hurting sales of Altria Group’s authorized products, according to Altria Chief Financial Officer Sal Mancuso.

    Speaking during a call with media and financial analyst, Mancuso noted that traditional cigarette sales had dropped even more than usual in the third quarter of 2023. The decline, he said, was caused by inflation and economic issues influencing customers as well as the heightened usage of illegal flavored disposable e-cigarettes.

    Mancuso also observed that there appeared to be more switching between different categories than initially assumed and that e-cigarettes alone were causing a 1.5 percent to 2.5 percent reduction in traditional cigarette industry volumes.

    R.J. Reynolds Vapor Co. leads the U.S. vapor market with a 41.8 percent share, per the latest Nielsen convenience store report released Oct. 7.

    Njoy, which Altria purchased for $2.75 billion in June, has struggled to increase its No. 3 market share.

    “The current state of the (vaping) market is intolerable for both legitimate manufacturers and consumers,” Altria CEO Billy Gifford said during the call. “The regulated market is being overrun by illegal flavored disposable e-vapor products made and distributed by companies violating virtually every rule and guidance FDA has issued since 2016. A lot of these products are imported. They’re imported illegally and then they’re sold illegally.”

    Saying a “strong course correction is needed,” Gifford noted that Altria has filed federal lawsuits in California against 34 organizations that include manufacturers, distributors and online retailers.

  • Cigarette Production Plunges in Pakistan

    Cigarette Production Plunges in Pakistan

    Photo: hassan

    Tobacco companies in Pakistan produced 43.9 billion cigarettes in 2022-2023, down from 64.7 billion in the previous fiscal year, reports The News International, citing figures from the Federal Board of Revenue’s (FBR) track-and-trace system.

    The country’s leading manufacturers, Pakistan Tobacco Co. and Philip Morris International, suffered year-to-year production declines of 32 percent and 39 percent, respectively. The production of Khyber Tobacco, by contrast, jumped 48 percent in the most recent financial year.

    The FBR collected tobacco revenues of PKR62.9 billion ($224.3 million) from July to September this year, compared with revenues of PKR177.7 billion in the comparable 2022 quarter.

    The FBR undertook 1,447 “actions of enforcement and seizure with confiscation” during the most recent financial year, according to FBR Project Director of Track and Trace Zaheer Qureshi

    The government is reportedly exploring strategies to boost revenue as part of an anticipated mini-budget in December.

    During a discussion on tobacco taxes, FBR officials attributed lamented the challenges posed by a limited workforce, logistical hurdles and an undocumented economy.

  • New Proposal to Tackle Illicit Trade

    New Proposal to Tackle Illicit Trade

    Photos: Niroworld

    Joey Salceda, the chairman of the Philippine House of Representatives Ways and Means Committee, has proposed new legislation to tackle the illicit trade in cigarettes, reports the Philippine News Agency.

    Among other things, the measures would address smuggling through the country’s economic zones, leakage of tobacco declared for export or transshipment, and the manufacture of fake cigarettes.

    The illegal tobacco market has flourished in the Philippines recently. The government expects to miss out on PHP60.6 billion ($1.06 billion) in revenue this year if the illicit tobacco trade continues on its current trajectory.

    Salceda noted that 2022 tax collections declined by 7.8 percent to PHP160.4 billion and that the government missed its 2022 target of PHP191.6 billion by PHP31.2 billion.

    Salceda said that illicit cigarettes are “easy to come by” in every trade segment. “There is no challenge to buying these brands,” he was quoted as saying. “And they sell at as low as one-fifth the price of licit cigarettes. The legitimate ones don’t stand a chance. Even fakes of premium brands are becoming easier to come by. From the same online shopping sites, fakes that are half the price and supposedly of the same flavor are sold openly.

    “In the meantime, the revenue base will continue to shrink, and there is a chance that prevalence might actually increase as a result of cheaper illicit alternatives. This is a serious national crisis. For better or for worse, our advocacy of higher taxes played a role in making the illicit sector more attractive. We have a responsibility to help solve this problem,” he said.

  • Illicit Sales Shrivel in Papua New Guinea

    Illicit Sales Shrivel in Papua New Guinea

    Photo: Anton Balazh

    The prevalence of illicit cigarettes in Papua New Guinea has declined remarkably, report the Papua New Guinea Post-Courier and The National, citing a report by the Manufacturers Council of Papua New Guinea (MCPNG).

    According to MCPNG CEO Chey Scovell, the share of tax-avoiding products has declined to 4 percent from 40 percent, allowing tax authorities to collect more revenue. “This is a massive drop, which has resulted in the PNG government taking back millions of kina in revenue from the illicit tobacco importers and sellers, when you consider that government was forgoing almost half a billion kina each year from untaxed illicit tobacco,” Scovell said. 

    He attributed this success to the implementation in 2019 of a new system to encourage manufacturers to produce and sell a smaller portion of their products at a reduced rate.

    “By allowing a 50 percent discount on taxed supplies, a real problem coming from high taxes has been addressed,” said Scovell. Previous high tax rates led to more illicit consumption, he noted. “Consumers in PNG faced prices as PGK1.20 ($0.32) for legal products compared to the PGK0.50 for illicit alternatives.”

    “Although there is still an ongoing battle to lower prices further, market observations reveal approximately 85 percent of consumers are shifting toward legal purchases,” Scovell said.

    “I appeal to the government to continue this so we do not go back to 2018 levels of illicit tobacco flooding our markets and causing the government and legitimate business to lose out,” he said.

  • California Flavor Ban Spawned Illicit Market

    California Flavor Ban Spawned Illicit Market

    Photo: sosiukin

    California’s 2022 ban on menthol cigarettes and flavored vapes has spawned a large, illicit marketplace for such products in the state, according to a study carried out WPSM Group.

    The researchers collected 15,000 empty discarded cigarette packs and 4,529 vapor product packages from May 1 through June 28 in 10 California cities. The study shows that the flavor ban has had limited effect on the access or demand for flavored vapor products or menthol cigarettes throughout the entire state. The results of the study include:

    • Of the vapor packs found, almost all (97.9 percent) were flavored.
    • Menthol (14 percent) and “menthol workaround” (7.1 percent) cigarettes combined made up 21.1 percent of the packs found compared to 24.5 percent of the California marketplace prior to the ban implementation.
    • More than one-quarter (27.6 percent) of products found were nondomestic products, which are not intended for the U.S. market. These products were primarily from U.S. Duty Free, Worldwide Duty Free, China and Mexico.
    • One cigarette brand, Sheriff, the fifth most prevalent brand found, is only intended for use outside the U.S.
    • The study indicated significant loss of state cigarette tax revenue. Among packs where it was possible to determine what tax stamp was applied, only 45 percent bore the California tax stamp.
    • This data suggests illicit cigarette markets are costing California as much as $1.27 billion annually in cigarette excise tax revenues—a funding source that supports important government programs.

    “This study provides further evidence that keeping products legal and regulated is the best path forward for tobacco policy,” said David Fernandez, vice president of government affairs and public policy of Altria Group, in a statement. “This data shows these products shifting in real time to illicit markets, which we know lack proper government oversight and other benefits of a well-regulated system.”

    The ban, which was implemented in December 2022, covers menthol cigarettes, flavored cigars, flavored smokeless tobacco and flavored vapor products.

  • JTI Calls for Greater Cooperation Against Illicit Trade

    JTI Calls for Greater Cooperation Against Illicit Trade

    JTI called for greater international cooperation between government agencies, industry and law enforcement in tackling the illicit trade in cigarettes.

    Speaking at the Global Tobacco and Nicotine Forum (GTNF) in Seoul, Sept. 19-21, Julian Cheung, the anti-illicit trade operations director for JTI’s Asia-Pacific region, warned that criminal groups involved in the illegal tobacco trade, siphon much-needed tax revenue from state budgets. “They don’t comply with laws and regulations and, therefore, taxpayers, governments and legitimate businesses are all paying a hefty price,” she noted.

    “Billions of dollars in revenue are lost to this criminal activity,” said Chueng. In 2019, the World Bank estimated the cost of the illicit tobacco trade to governments at between $40 billion and $50 billion annually.

    “Let’s shift the narrative surrounding illegal trade and act together,” said Chueng in her presentation. “Through innovative strategies, cooperation and a focus on disrupting the financial foundations of these criminal networks, we can curtail the illegal tobacco trade, and safeguard our communities and economies.”

    Chueng’s call for action fit well with the GTNF’s theme, “Change the Conversation. Change the Outcome.” The conference brought together hundreds of stakeholders from across the industry, including businesses, research consulting groups, scientists, public policy and regulatory experts and educators, to discuss industry trends and challenges and share best practice thinking.

  • Turkiye: Thousands of Cigarettes Seized

    Turkiye: Thousands of Cigarettes Seized

    Image: HENADZY

    Turkish police seized more than 600,000 packs of cigarettes and 53 e-cigarettes in a smuggling case in Agri, according to 2Firsts.

    Three suspects were arrested as a result of the case.

  • DFA Signs Anti-Illicit Trade Declaration

    DFA Signs Anti-Illicit Trade Declaration

    Duty Free Americas has signed the Duty Free World Council (DFWC) and Tax Free World Association (TFWA) anti-illicit trade declaration.

    With over 200 stores in airports and border crossings throughout the Americas, the addition of Duty Free Americas to the declaration marks a major extension of the duty-free and tax-free industry’s public commitment to combat illicit trade, counterfeiting and intellectual property theft.

    The DFWC and the TFWA launched the anti-illicit trade declaration in July 2023. By signing the declaration, signatories commit to a zero-tolerance approach to illicit trade within their own organization.

    “The DFWC/TFWA anti-illicit trade declaration continues to grow in strength, and I am very pleased to welcome Duty Free Americas as the most recent signatory to this important initiative,” said DFWC President Sarah Branquinho.

    “Our industry boasts one of the most transparent, trusted and secure supply chains in the world, and this campaign sends a clear message to our millions of customers around the world that they can shop in duty[-free] and tax-free stores around, confident that the products they are purchasing are authentic and genuine.

    “Signatories to this declaration are making a firm public commitment to never permit any form of illicit trade, counterfeiting or intellectual property theft and to hold their commercial partners to that same standard. We welcome the support of any travel retail operator or supplier [who] wishes to be a part of the declaration, and we continue to encourage members of our industry to join us.”

  • Pakistan Poised to Enact Tracking System

    Pakistan Poised to Enact Tracking System

    Photo: Tobacco Reporter archive

    Pakistan’s Federal Board of Revenue (FBR) has signed agreements with 22 tobacco manufacturers to install a track-and-trace system at their factories, reports The News International.

    The digital system, which allows the FBR to monitor the production, distribution and sale of tobacco products through unique identification codes and stamps on cigarette packs, is expected to increase the tax revenue from the tobacco sector, which contributes about 1.5 percent of the total tax collection in Pakistan.

    The FBR initiated the system two years ago. Pakistan Tobacco Company (PTC) and Philip Morris International were the first to sign agreements and make the system operations, followed by Khyber Tobacco Co.

    Now the FBR has signed agreements with 18 more manufacturers.

    There are between 26 and 30 tobacco manufacturers in Pakistan, according to FBR estimates, though some of them are not operational or have moved to nominally self-governing territories such as Azad Jammu and Kasmir.

    The implementation of the track-and-trace system has been marred by legal challenges. With the exception of one case, all these challenges have been rejected in court.  

    FBR officials expect the system to become operational by October 2023.