In 2013, one in every 10 cigarettes lit up in the world was illicit, valued collectively at almost US$40 billion, with an equivalent tax loss to global governments. It is a phenomenon that impacts tobacco manufacturers, governments and the tobacco control community and which requires a coordinated international legal and technological response. This briefing outlines the nature of illicit trade and assesses whether a common approach is possible.
The volume of duty-not-paid cigarettes consumed in the world was some 570 billion sticks with an estimated value of US$39 billion.
Global illicit trade grew by 5% to reach a penetration of 9.5% globally. However, as with all tobacco statistics, China skews the picture. Consumption of illegal cigarettes declined by 3% in China in 2013 meaning that excluding it world volumes rose by 9% with a penetration rate of 12%.
Price differentials remain the key driver of illicit trade on both the demand and supply sides. Consumers purchase illicit products from a desire or necessity to save money, while illicit suppliers are attracted by the substantial profits on offer. Taxation and regulation are recognised as facilitators of demand, while weak governance and under-criminalisation aid supply.
Western European share of illicit increased more than any other region between 2008-2013 exemplifying the overwhelming appeal of untaxed products to some consumers in difficult economic times.
Illicit whites, cigarettes manufactured legally but with no legitimate destination market continue to gain share in Europe and Asia benefiting from their higher quality and non-adherence to packaging requirements.
Every tobacco stakeholder is impacted by illicit trade. Major companies suffer volume impairment; global state revenue loss is similar to the near US$40 billion market size and public health policies are undermined. Public and private agencies need to act in concert to combat the issue.
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