World
The latest cigarette trafficking reports have shown the tobacco industry has been right all along.
As per a Klynveld Peat Marwick Goerdeler (KPMG) report published on June 8, a total 53 billion illicit cigarettes were consumed in the EU in 2015 alone. This accounts for 10% of the total tobacco market there. The unlawful activities have dented tax revenues by as much as €11.3 billion.
KPMG conducts a study every year across 28 European nations including Switzerland and Norway. The data also sheds light on Poland and France, which outdo other countries in illegal tobacco trading. White cigarettes are sourced mainly from Belarus. Almost 1.3 billion white cigarettes originate from Jebel Ali Free Trade Zone in Dubai (U.A.E). Meanwhile, 88% of the trafficked cigarettes are from non-EU countries.
Tobacco companies across the world undertook several measures to combat illicit tobacco trade. In May 2016, tobacco major Philip Morris International Inc. (PMI) came up with a new initiative – PMI Impact – to stop such practices. PMI Impact is headed by a seven-member council of external independent experts. These members have extensive experience in the field of law, anti-corruption, and law enforcement.
Reynolds American Inc. set up a website - www.thenewtobaccoroad.com, showing how cigarettes are smuggled from lower-tax states in the US to higher-tax ones in the Northeast through I-95. The initiative aims to tackle the problem by raising awareness about the smuggling activities being carried out on the east coast along the highway Interstate 95 – the New Tobacco Road – which has turned into a key transit route for illegal activities.
Illicit trade of cigarettes is on the rise. Strict governmental actions in the form of higher excise taxes prompt tobacco players to raise prices. This, in turn, gives rise to smuggling of counterfeit cigarettes at much lower prices. As a result, tobacco players’ margins are impacted to a large extent. Moreover, these cigarettes are far more injurious to health than their legal counterparts, which again mars the reputation of tobacco majors.