- Buying illegal tobacco products is in danger of becoming
normalized, with 43% of adult smokers surveyed comfortable buying
cigarettes, even if they know they are produced or sold
illegally.
- Governments’ inability to collect tax revenue due to the
illegal tobacco trade is a significant issue for 88% of
respondents.
- Around half of the respondents cite illegal tobacco trade as
being a threat to their country.
- 61% of respondents do not believe that the sale of illegal
tobacco is a victimless crime.
The new study Fighting the Dark Underworld: How the illegal
trade in tobacco threatens to overwhelm us, by Intrinsic Insight
and commissioned by JTI, sheds new light on the pervasiveness of
organized crime within global society, focusing on four countries
with high levels of illicit tobacco trade: Canada, France,
Philippines, and the United Kingdom.
The report, released today, examines the “dark underworld” and
how unstable geo-political environments, fragile economies and a
lack of serious deterrents creates the ideal conditions for a surge
in criminal activity and increased profits for criminal networks.
The report highlights key indicators – found across the four
countries – that are allowing illegal trade to flourish.
“A combination of factors ranging from poor border controls and
ineffective penalties to corruption, excessive taxation and
legislation, are contributing to both the increase in demand for
illicit products while making it easier for criminals to grow
substantial criminal empires,” said Vincent Byrne, Global
Anti-Illicit Trade Operations Director, JTI.
1. Cost of living crisis leads to black market purchasing
decisions
Compromised living standards are forcing greater numbers of
consumers into making difficult lifestyle decisions, creating ripe
environments for criminals to push a larger number of smokers
towards cheaper illegal channels and illegal products. Buying
illegal tobacco products is in danger of becoming normalized
behavior, with four in 10 (43%) adult smokers surveyed across these
four countries now finding themselves comfortable with the idea of
buying cigarettes, even if they know they are produced or sold
illegally.
2. Excessive taxation and loss in government revenue globally
funds criminal activity
As illegal sales continue to bombard the legal tobacco market,
governments are facing a decline in tax revenue. According to the
World Bank, governments globally are estimated to be losing out on
40-50 billion USD annually in excise alone due to consumers being
lured into buying illegal tobacco products. According to 88%
surveyed, governments’ inability to collect tax revenue because of
illegal trade is a significant issue.
3. Rapid technological progress is a challenge to
enforcement
The criminal shift towards e-commerce and the advancement of
Artificial Intelligence is leading to an increased sophistication
of production, distribution, and sale of illegal goods. Of those
adult smokers surveyed, 14% have claimed to have recently purchased
illegal tobacco via social channels.
4. Not cracking down on illegal tobacco trade to curb other
serious crime
Not only is the money being lost to governments, thus limiting
their capacity to fund public services such as law enforcement and
important public services, the illegal tobacco trade is a direct
gateway to other serious crime such as people trafficking and
terrorism. The study found that policy makers underestimate the
extent of the worry for the public, with 50% of respondents citing
illegal tobacco trade as being a threat to their country, which is
close to parity with those citing drugs/narcotics (54%) and
terrorism (49%) as national dangers. The sale of illegal tobacco is
not a victimless crime, according to 61% of those surveyed.
5. Existing penalties are not severe enough to deter
criminals
More collaboration is needed to crack down on illegal trade and
its intricate international criminal networks. According to 61%
surveyed, authorities are not taking the situation as seriously as
they should. The United Nations Office of Drugs and Crime estimates
that no more than 2% of global shipping containers are inspected,
signaling to criminal gangs that illegal trade is a relatively
“risk free” enterprise with large financial upsides.
“While the drivers fueling illegal trade are evident in each of
the four countries, they have global impact,” Byrne said. “Given
the borderless nature of illegal trade, in the future, countries
that currently do not have an illicit tobacco problem, are advised
to notice the triggers to avoid the onset and spread of criminality
linked to illicit trade in their countries.”
A synopsis of the situation in the four countries and
consolidation of key report findings includes:
Canada: Contraband tobacco has spread unchecked across the
country to the detriment of revenue receipts due to serious
disparities in tax harmonization because of Canada’s geography and
complicated relationship with First Nation states.
- In Canada, the high volume of tobacco products produced by
First Nation states is a major anomaly that drives illegal trade
there. This bears a similarity to ‘free trade zones’ such as those
that exist in places like the UAE. Tobacco produced legally in
these zones often ends up in other jurisdictions where it then
becomes an illegal product.
- The report found that for 57% of Canadians, the economy and
general cost of living is one of their top five concerns.
- Seven out of ten (71%) Canadians believe that the proceeds of
the illegal tobacco trade should fund law enforcement.
- Eight out of ten (81%) Canadians believe government should work
with industry to combat illegal trade.
France: High levels of taxation, an absence of border
controls and issues of affordability caused by rising living costs
are having a big impact on the increase in illegal trade. The
French government’s cornerstone policy in the run up to this
summer’s 2024 Paris Olympics is to remove illegal tobacco sellers
from the streets and has pledged to impose stronger fines,
penalties, and arrests of street sellers. Cracking down on
clandestine factories is also a focus for government.
- The report found that one in three members of the French public
cite local crime as one of their top five concerns.
- Seven out of ten (76%) French nationals feel that the sale of
illegal and fake tobacco by street vendors makes their
neighborhoods less safe.
Philippines: In a recent re-classification of tobacco as an
agricultural product, the Philippines Congress has passed
amendments to the country’s agricultural bill that established the
smuggling of tobacco as an act of economic sabotage. This
amendment, which is expected to be signed into law by the
President, includes harsher penalties and fines, and it has the
potential to have a significant impact on smuggling and the illegal
distribution of tobacco products in Philippines.
- As a result of legislation passed in 2013 (the RA 10351, known
locally as “the Sin Tax” laws), revenues raised through tobacco
sales have been used to finance public services. Several
independent studies have shown that these laws have created an
increase in demand for illegal tobacco and revenue losses for the
government.
United Kingdom: While the UK is experiencing its largest ever
cost-of-living crisis, with public debt standing at over 184% GDP,
and with 11.7 million of the UK’s 67 million population living in
poverty according to official figures, the UK government – with an
upcoming election on July 4 – is scrambling for revenue.
- The HMRC estimates that in 2021, the loss in revenue to the UK
exchequer due to illegal tobacco trade was a steep 2.5 billion GBP,
money that could be used to fund the UK economy and social
programs, instead of being funneled directly into criminal
networks.
- While many UK authorities, including Customs & Excise,
Trading Standards, Border Force, the Police, and the National Crime
Agency, have significant roles to play in tackling illegal trade,
often times they have conflicting and overlapping responsibilities
and dwindling resources.
- Harsher deterrents and penalties are needed for criminals who
are only too eager to exploit these loopholes.
- The study found that 72% of UK adult tobacco consumers would be
happier paying the tax on tobacco products if the Government spent
more of these taxes on law enforcement.
In the report, a multi-faceted approach for tackling the “dark
underworld” includes:
- Increased cooperation between governments and law enforcement
at both international and national levels. This includes
information sharing between industry and authorities.
- In the case of tobacco, there needs to be a concerted effort to
increase the fines and punishments for those producing,
distributing, and selling illicit products to increase the risk and
consequences for criminals. This should be coupled with stronger
enforcement.
- Law enforcement agencies should also explore using powers other
than anti-smuggling and anti-counterfeiting laws, for example,
anti-money laundering, anti-income tax evasion and anti-organized
crime laws.
- Reasonable and moderate taxation is vital to maintain
affordability of legal products.
###
About JTI:
JTI, a member of the JT Group of Companies, is a leading
international tobacco company, selling its products in more than
130 markets. It is the global owner of both Winston and Camel,
respectively the second and third largest cigarette brands in the
world. Other global brands include MEVIUS and LD. JTI is also a
major player in the Reduced-Risk Products category with its heated
tobacco brand, Ploom, e-cigarette brand, Logic, and Nordic Spirit
nicotine pouches. Headquartered in Geneva, Switzerland, the Company
employs over 46,000 people and was awarded Global Top Employer for
the tenth consecutive year in 2024. For more information, visit
www.jti.com
Methodology Note:
This report combines insight from several sources including a
review of existing sector literature and expert qualitative
in-depth interviews with academics, policy makers, and law
enforcement officials from across the United Kingdom, France,
Canada, and the Philippines. Interviews with expert contributors
were conducted between November and December 2023.
Additionally, the study includes new findings from n=2,000
survey-based interviews conducted with the public and smokers
across the four key markets represented. Quantitative research was
conducted by Intrinsic Insight among a nationally representative
sample of members of the adult general public in each market
between December 1, 2023, and January 12, 2024.
A full list of acknowledgements and sources is included in the
reports.
To access the two reports, please click here
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240621113318/en/
For more information, please contact: JTI Corporate
Media Relations pressoffice@jti.com