"If the global illicit trade were eliminated, governments would gain at least $31 billion, and from 2030 onwards would save over 160,000 lives a year."
— International Union Against Tuberculosis and Lung Disease
Encouraging Consumption, Funding Organized Crime
The illicit trade in tobacco products is a massive global problem that undermines efforts to reduce tobacco use and save lives, helps fund organized crime and terrorist organizations, and costs governments billions in lost tax revenue.
Cigarette smuggling and counterfeiting dominate illicit trade in tobacco products; cigarettes are the world’s most widely smuggled but otherwise legal consumer product. Experts estimate that illicit trade accounts for approximately one-tenth of global cigarette sales, or about 600 billion cigarettes.
Illicit trade in tobacco products circumvents policies to reduce tobacco use, in particular higher tobacco taxes, and encourages consumption by making cigarettes available cheaply. Eliminating the global illicit trade in cigarettes would save over 160,000 lives each year from 2030 onward.
Illicit tobacco trade costs governments staggering sums of revenue. At least $40.5 billion USD in current tax revenues is lost each year by governments to illicit tobacco trade.
Illicit trade is a threat to international security. There is evidence that the illicit tobacco trade is carried out by transnational criminal groups and has been used to raise funds for terrorist organizations. Tobacco companies themselves have been involved in smuggling products into restricted markets in order to introduce their brands cheaply and increase market share
The Heavy Burden on Low-Income Countries
The burden of illicit cigarette trade falls mainly on low- and middle-income countries. A larger percentage of the cigarette market in low- and middle-income countries is illicit, compared to high income countries. Annual tax revenue lost to governments in low- and middle-income countries because of illicit cigarette trade greatly exceeds the tax revenue lost in high income countries.
The Protocol to Eliminate Illicit Trade in Tobacco Products (ITP) was adopted by the Parties to the FCTC in November 2012. The ITP calls for supply chain controls related to licensing, tracking and tracing, record-keeping; regulation of tobacco product sales by internet, phone and tax- and duty-free zones; and criminal liability and international cooperation. The ITP will complement and expand Parties’ obligations under Article 15 of the FCTC. To enter into force, 40 countries must ratify the protocol.