"Governments should not heed tobacco industry threats of rising illicit trade as an excuse to postpone or avoid implementing strong tobacco control measures, but should take active measures to fight illicit trade, such as employing comprehensive track-and-trace systems.""
— American Cancer Society
Undermining Public Health
The illicit trade in tobacco products undermines efforts to reduce tobacco use and save lives, and costs governments billions in lost tax revenue. Further complicating the public health and governance issues caused by illicit tobacco trade, tobacco companies often exaggerate the impact of illicit trade in order to scare policy makers from taking science-based steps to reduce tobacco use.
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. It is estimated that over 40 billion dollars in current tax revenues is lost each year by governments to illicit tobacco trade. The tobacco industry often uses the argument that implementing tobacco control policies, especially high taxes, will increase illicit trade. However, the illicit trade of tobacco products is facilitated by more than just high prices. It is facilitated by corruption, the presence of criminal networks and weak government enforcement capacity. Historically, tobacco companies have even participated in and encouraged illicit trade themselves to introduce their products in markets that they are restricted from entering.
The tobacco industry exaggerates the nature and impact of illicit trade when arguing against proven measures to reduce tobacco use because communicating the simple truth about tobacco control and illicit trade does not serve its interest: Strong tobacco control policies like tobacco tax increases reduce tobacco use even in the presence of illicit trade.
The Heavy Burden on Low-Income Countries
The burden of illicit cigarette trade falls mainly on low- and middle-income countries where cigarette prices are low. 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.