Increasing tobacco prices is the number one policy lever to encourage smokers to quit and to discourage young people – who are particularly price sensitive – to start smoking. The illegal trade undermines all of this. In the UK, progress has been made in recent years to reduce smoking rates to their lowest level yet. However, the existence of an illicit trade in tobacco products reduces the effectiveness of tobacco control measures because:
- Illicit tobacco is often available at cheaper prices, undermining the effectiveness of taxation, making it harder for smokers to quit. Cheap tobacco also makes it easier for non-smokers to start and ex-smokers to relapse.
- Illegal tobacco is available from a range of sources within some local communities, making it easier for children to start smoking and enabling them to become hooked at a young age.
The illicit tobacco trade is often part of organised criminal activity and is linked to a range of other illegal trades including alcohol and DVD production, people-trafficking and drug smuggling. There is also evidence to suggest that the illicit tobacco trade funds terrorism. Fortunately, over time and with continued investment, this problem is reducing.
Data from HM Revenue & Customs show a long-term, sustained decline in the size of the illicit tobacco market since 2000, which is backed up by research carried out in a number of English regions. However, efforts must be sustained in order continue this downward trend.
The tobacco industry involvement in tobacco smuggling
Tobacco smuggling increased in the 1990s due to a vast expansion in British cigarettes being sold overseas in bulk which were destined to be smuggled straight back to the UK – with tobacco manufacturers benefitting from the increase in sales of their products at a cheaper tax-free price. During a UK Parliament’s Public Accounts Committee hearing on the illicit tobacco trade in 2002, George Osborne MP addressed the Chief Executive of Imperial Tobacco:
“One comes to the conclusion that you are either crooks or you are stupid, and you do not look very stupid. How can you possibly have sold cigarettes to Latvia, Kaliningrad, Afghanistan and Moldova in the expectation that those were just going to be used by the indigenous population or exported legitimately to neighbouring countries and not in the expectation they would be smuggled?”
In 2000, the European Commission and Member states took legal action against the tobacco industry in the US alleging the industry had engaged in ‘an ongoing global scheme to smuggle cigarettes.’ Although it does not constitute an admission of liability, the big tobacco multinationals Philip Morris International, Japan Tobacco International, British American Tobacco and Imperial all signed legally binding anti-smuggling agreements with the EU paying billions of dollars in total to the EU and Member states. More recently Japan Tobacco International has again been under investigation over new allegations that its distributors were smuggling cigarettes across more than a dozen countries to avoid tax.
As well as proven involvement in the illicit trade, it is in the tobacco companies’ interests to exaggerate the size of the illicit tobacco market, primarily to oppose or delay the introduction of further tobacco control measures and to promote their image as ‘responsible manufacturers’. Despite independent data showing that the market is reducing, tobacco industry-generated data continues to suggest that the market is growing rapidly. Most surveys are based on litter picks in areas with high smoking prevalence and do not represent a true picture of the market, and have been widely criticised. For further information see:
- The partnership briefing on illicit tobacco and the facts about the tobacco industry
- Tobacco tactics, an online resource providing up to date information on the tobacco industry
- A critique of a report into the illegal tobacco trade commissioned by Philip Morris International: Towards a greater understanding of the illegal tobacco trade in Europe: a review of the PMI funded ‘Project Star’ report
- An analysis of tobacco industry manipulation of illegal tobacco figures by the University of Bath: Tobacco industry manipulation of data on and press coverage of the illicit tobacco trade in the UK
- A study of the trends in cheap tobacco use among adult smokers in the UK between 2002-2014 via changes in product type, purchase source and prices paid: Availability and use of cheap tobacco in the UK 2002-2014: findings from the International Tobacco Control Project.
Read more about what illegal tobacco is.