Carreras vows to push back as high taxes fuel illegal cigarette trade

Wednesday, June 12, 2019

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JAMAICA'S largest cigarette trader, Carreras Ltd is reporting a 30 per cent cut in sales of its legitimate product due to the influx of illicit cigarettes smuggled into the island, and is warning that it will “push back” against any contemplated additional tax increases.

“Some 100 million sticks have been lost to the illegal products, resulting in six billion dollars lost across the supply chain. Everybody loses. The Government loses tax income, retailers lose money, and Carreras loses profits due to the last tax increase,” Managing Director Marcus Steele said at a press conference to relaunch its Youth Access Prevention (YAP) campaign, geared at preventing cigarette sales to minors, recently at its Ripon Road headquarters.

In 2017 the Jamaican Government raised taxes on cigartettes from $14 to $17 per stick, with the intention of raising some $876 million of additional revenues. However, the move backfired as consumers switched to the illegal cigarettes and an estimated $1 billion less in revenues were collected in 2018.

Declaring that Carreras would resist any additional taxes as the authorities mull revenue sources to fund the Government's proposed compulsory National Health Insurance Plan, Steele said it would backfire as the legitimate trade could absorb no more taxes since it has pushed further to the wall by unfair competition.

“Fifty per cent of cigarette sales in the Kingston Metropolitan Area (KMR) are illicit cigatettes,” said Steele as he told journalists of the dangers of the ingredients found in the smuggled cigarettes, which do not show health warnings and avoid other regulatory requirements and sold more cheaply across the island.

He estimated that the sale of illegal cigarettes is now a $5-billion-per-year industry with the potential to fund a range of criminal activities such as gun running, as they are connected with the underground.

He also noted that the excise tax at the port of entry is avoided by smugglers and illegal cigarettes are sold at some $35 dollars less per stick than Carreras, which retails at $55 per stick versus $20 for the illegal ones.

The Carreras MD said the company would continue to urge the Government to pursue increasing surveillance at ports including the use of updated detection technologies, but observed that these were “taking too long” to make a bigger dent in the illicit trade.

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